Recently my mother was admitted to a rest home. She was assessed as needing hospital-level care, for which she must pay $4400 a month.
This monthly amount is payable until the value of her assets falls below $219,889, at which time she will be entitled to the residential care subsidy, although she will no longer receive New Zealand Superannuation.
This whole situation came as a surprise. It seems we should have planned for this eventuality many years previously.
Some of our friends have had their lawyers draw up trusts to which assets have been transferred over several years, thus reducing their assets below the threshold. Their lawyers have assured them that they will receive the residential care subsidy.
However, it seems that perhaps the rules relating to trusts have changed recently and they may no longer guarantee entitlement to the subsidy. I wonder if you can clarify the situation please.
I’m sure you’re not the only ones unaware of this situation. Other readers might also want to learn about it.
The Ministry of Social Development confirms that, “To be eligible for a Residential Care Subsidy, single people must have assets equal to or below the allowable limit of $219,889.”
However, it’s not quite the end of NZ Super for your Mum.
“New Zealand Superannuation continues to be paid where a client has been needs assessed as requiring long-term residential care in a hospital or rest home indefinitely,” says a MSD spokesperson. “The majority of the NZ Superannuation payment is paid to the rest home towards the cost of care. The client is able to retain a portion of their NZ Superannuation to purchase items for their personal needs. For example, shampoo, magazines and postage stamps.
“This is referred to as the ‘Personal Allowance’. As at April 1, 2016, the rate of personal allowance is $86.90 a fortnight.”
I understand why you’re unhappy with the situation. Perhaps it means that your inheritance is being eroded away. That’s hard to take.
But at least the allowable limit is much higher than it used to be. And it’s difficult to argue that taxpayers should cover the long-term residential care costs of someone who is reasonably well off.
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Both income and asset tests decide who gets a residential care subsidy, Mary Holm writes. Photo / 123RF
Recently my mother was admitted to a rest home. She was assessed as needing hospital-level care, for which she must pay $4400 a month.
This monthly amount is payable until the value of her assets falls below $219,889, at which time she will be entitled to the residential care subsidy, although she will no longer receive New Zealand Superannuation.
This whole situation came as a surprise. It seems we should have planned for this eventuality many years previously.
Some of our friends have had their lawyers draw up trusts to which assets have been transferred over several years, thus reducing their assets below the threshold. Their lawyers have assured them that they will receive the residential care subsidy.
However, it seems that perhaps the rules relating to trusts have changed recently and they may no longer guarantee entitlement to the subsidy. I wonder if you can clarify the situation please.
I’m sure you’re not the only ones unaware of this situation. Other readers might also want to learn about it.
The Ministry of Social Development confirms that, “To be eligible for a Residential Care Subsidy, single people must have assets equal to or below the allowable limit of $219,889.”
However, it’s not quite the end of NZ Super for your Mum.
“New Zealand Superannuation continues to be paid where a client has been needs assessed as requiring long-term residential care in a hospital or rest home indefinitely,” says a MSD spokesperson. “The majority of the NZ Superannuation payment is paid to the rest home towards the cost of care. The client is able to retain a portion of their NZ Superannuation to purchase items for their personal needs. For example, shampoo, magazines and postage stamps.
“This is referred to as the ‘Personal Allowance’. As at April 1, 2016, the rate of personal allowance is $86.90 a fortnight.”
I understand why you’re unhappy with the situation. Perhaps it means that your inheritance is being eroded away. That’s hard to take.
But at least the allowable limit is much higher than it used to be. And it’s difficult to argue that taxpayers should cover the long-term residential care costs of someone who is reasonably well off.
On the trust situation, the MSD says, “People are required to disclose the details of the trust on the Residential Care Subsidy application form. This includes details of who established the trust, what assets were transferred to the trust and what gifting has taken place.”
The spokesperson continues, “The Residential Care Subsidy is both income- and asset-tested. When people transfer assets out of their ownership into a trust, then the Social Security Act provides for consideration of deprivation of both excess assets gifted and deprived income on the gifted assets.”
In other words, if someone puts assets in a trust, they deprive themselves of those assets and also income – perhaps interest, dividends or rent – that those assets could earn.
If MSD didn’t look into this, “people would simply give away their assets in order to qualify for a subsidy”, says the spokesperson.
For more info on the subsidy, see the next Q&A and tinyurl.com/NZResCare. For more on trusts, gifting and deprivation of assets and income, see tinyurl.com/NZResCareTrusts.
Note that the MSD website says, “The act or inaction does not need to have been done for the purpose of obtaining Residential Care Subsidy. Acts of deprivation for legitimate reasons may still be regarded as deprivation and as a result may still be added back to the financial means assessment.”
The spokesperson adds, “People choose to arrange their finances in a variety of ways. As a result, each application is considered on its own merits.”
If I were one of your friends, I wouldn’t be fully confident of their position. And neither should they be. I don’t want to get back into a long debate about trusts. We’ve done that before in this column. But in New Zealand, trusts have too often been used by the well off to take advantage of “the system”.