At some stage in your life you may move from independent living into residential assisted care. There are a few options available, so what might that look like?
Retirement Villages offer semi independent living in a villa or apartment. They charge a monthly fee for maintenance and additional services, and receive no government funding.
Residential Care is supported or hospital level care. Government subsidies are available which are needs, asset and income tested.
Needs Test asks if you are in need of long term residential care in a rest home or hospital, and are over the age of 65.
The Asset Test is a little more complicated and the figures are updated on a yearly basis. It’s best to seek up-to-date information. Your house is only exempt if it’s the principal residence of your partner, dependent or child.
Income test is also updated regularly, but it doesn’t allow for a lot coming in over and above a pension. It’s best to seek professional help when filling out your application. Occasionally people are referred to us when their application is denied, and we are able to help them fill their forms out correctly to help their applications go through.
Issues can arise if you have gifted too much money in the past. In the five years prior to going into care, the maximum amount you can gift is $6000 per year. It’s useful to plan your future, and start reducing your gifting well in advance of when you may need care.
When was the last time you looked at your Family Trust and made sure it was fit for purpose? It pays to have your trusts reviewed before you reach the decision that you need residential care. In some cases, people are forced to consider winding up the trust and distributing assets, a decision that should not be taken lightly.
The Right to Occupy a retirement village unit cannot be purchased by a Trust, only by an individual. So you must ask where that money, plus ongoing village contributions will come from.
The people going into care are also trustees, you must ask if it’s time to appoint new trustees. Do they have all their mental faculties?
Income Derived From Gifted Assets
As previously mentioned, WINZ does not allow for much income over and above the pension. As of May 2019 there is a case going through the High Court of Appeal - Broadbent v Chief Executive of the Ministry of Social Development.
MSD has argued that it can assess income that would have been earned from gifted assets as deprivation of income. The High Court has said where a gift is made, that gift is absolute. The person who made the gift can’t go to the receiver and ask for any rights, benefits or entitlements that might be associated with the gift they made. The MSD appealed that decision and we are currently awaiting the outcome from the Court of Appeal.
Contracting Out Agreements
MSD also does not recognise Contracting Out Agreements when assessing assets and income for residential care purposes. They assess all assets as a joint 50/50 split, even when an a contracting out agreement is in place.
For example, a couple, both in their second relationship want to protect their own assets for their own children. The husband develops an illness that requires hospital level car, and the wife remains in the retirement village. Because the total sum of both their assets exceed the subsidy threshold, they are required to pay for their care themselves, even though the husband has no access or entitlement to his wife’s assets. This can result in both husband and wife losing their assets until their combined assets fall below the threshold. This decision has not yet been challenged in court.
Wills and Enduring Powers of Attorney
Most retirement villages require all residents to have Wills and Enduring Powers of Attorney before moving in. If the person has already lost capacity and does not have an EPA in place, applications can be made to the Family Court to appoint welfare guardians or property managers. These proceedings can be costly and time consuming, so it’s worth considering creating an EPA well before you think you may need one.
We can achieve the best results when we work closely with you, your financial advisor and accountants, and start planning early. If you want to get a head start on protecting your future, come and see the team at Godfreys Law.