Asset Protection & Residential Care Subsidies
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Asset Protection & Residential Care Subsidies
Asset Protection & Residential Care Subsidies Govett Quilliam Where Law meets Life 2 Your Home 2 Protection of your Home using a Trust 3 Residential Care Subsidies 6 Residential Care Loans 6 Alternatives to a Trust 7 The Benefits of the Trust 8 Enduring Powers of Attorney 8 Prepaid Funeral Account 8 Wills 9 Further Information
Asset Protection & Residential Care Subsidies Govett Quilliam Where Law meets Life
Your Home
Most couples own their own homes either as that percentage (normally 50%) of the house
joint tenants or as tenants in common. A joint (or other assets) which is distributed on the
tenancy means both names of the owners are death of either party in accordance with the
on the title and the property is inherited by terms of that person’s Will.
the surviving spouse or partner on the death
of the first of the owners. Under the present law any assets in your name
either solely or as joint tenants or tenants in
Property held as tenants in common in common can be used to pay for any liabilities
percentage shares means each party owns which you may have.
Protection of your Home using a Trust
By transferring your property to a Trust the made after 1 October 2011 without payment
property ceases to be owned by yourself. This of any gift duty, but will affect eligibility to
involves selling your property to the Trust. obtain a residential care subsidy and other
This usually involves the preparation of an WINZ benefits.
Agreement for Sale and Purchase and selling
the property from yourself to your trustees The beneficiaries of the Trust are named in the
at market value. Your trustees acknowledge Trust Deed and we recommend discretionary
a debt back to you for the value of the home, Trusts to enable the trustees to benefit any of
and thereafter you immediately embark on a the beneficiaries from either the income or
gifting programme to forgive the debt owed capital from the Trust.
by the Trust.
Under the current laws and policies
The donors thereafter gift a maximum of surrounding the means assessment, there
$27,000.00 per year between them to forgive can be no guarantee that even if property or
the indebtedness owing by the trustees of the assets are held in a Trust, that they will be
Trust. Gifts in excess of $27,000.00 can be excluded from calculation.
2Asset Protection & Residential Care Subsidies Govett Quilliam Where Law meets Life
Residential Care Subsidies
The residential care subsidy provides financial This should not be confused with the
assistance for long term residential care in a limit of $27,000.00 per year which was
rest home or hospital. allowed by Inland Revenue as an annual
gift without gift duty made before 1
Applying for this subsidy requires an applicant October 2011. Gifts in excess of
to undergo a means assessment. $27,000.00 per year prior to the five
years before making application for the
The means assessment for the residential care subsidy could also affect eligibility for
subsidy is completed by WINZ. Eligibility the subsidy.
for the subsidy may be affected if you have
deprived yourself or gifted away cash and/or Who can get a subsidy?
property or income (eg interest free loans). You may be able to get a residential care
You should get legal advice on how your subsidy if:
eligibility may be affected before setting out
• You have had an assessment of your
on a gifting program.
individual needs that confirms you need
long term residential care in a licensed
Please note that the information provided
rest home or hospital; and
is a general overview. Most of these are
• You need this care for an indefinite
details from part of WINZ policy and length of time; and
as such are liab le to change at any time. • You are 65 or older (some people aged
For more detailed information please refer 50-64 may also qualify); and/or
to the WINZb we site. • The value of your assets are within certain
(www.workandincome.govt.nz/products/a- limits.
z-benefits/residential-care-subsidy.html).
The value of your assets
Small gifts The value of your assets must not exceed
Gifts of up to $6,500.00 a year may be excluded these limits:
from the financial means assessment. It may be • $239,930.00 for single or widowed people;
possible to gift up to $6,500.00 retrospectively or
for up to five years for you and your partner • $239,930.00 in combined assets if you are
(even if they have died). This is $32,500.00 in a couple and both in long term residential
the last five years. If your partner applies at care; or
the same time this doubles to $65,000.00. • $131,391.00 in combined assets (not
including your car and the value of
The limit for gifts in the five year the house if it is the principal place of
period preceding the application for a residence of the partner who is not in
residential care subsidy is set at the care) if you are a couple and only one of
same level of $6,500.00 per year. you is in care.
3Asset Protection & Residential Care Subsidies Govett Quilliam Where Law meets Life
These exemption thresholds increase by • Earnings from investments or business
the Consumer Price Index change each year, or employment;
with the next due 1 July 2022. • Income from a Family Trust or estate.
What counts as assets? What’s not included as income?
The assets taken into account include: Any money your partner has earned through
work;
• Cash or savings;
• Income from assets when the income
• Investments, shares or stocks;
is under:
• Loans made to other people (including
Family Trusts); o $1,042.00 a year for a single person
• Your house and car if you live alone; o $2,083.00 for a couple when both
• Bonus bonds; have been assessed as needing care
• Investment properties; o $3,125.00 a year for a couple where
• Boats, caravans, campervans one partner has been assessed as
• Life insurance policies with surrender needing care
value • A War Disablement Pension from New
Excluded assets Zealand or any other Commonwealth
Assets not counted include: country.
• Your house and car if a partner If you have a partner caring for dependent
lives at home; children there are maximum income levels
• Personal belongings such as clothing and that your partner can earn before part of their
jewellery; income is required to be used to
contribute towards your residential care
• Pre-paid funeral expenses for you and fees.
your partner of up to $10,000.00 each;
• Household furniture and effects. If you own a home
What counts as income? Your home counts as an asset if you are
Income is money you get from any source, single, widowed, or both you and your
including: partner are in long term residential care. Or
your partner is not in long term care but
• New Zealand superannuation, veterans you have chosen to have your assets
pension or any other benefit; assessed against the $239,930.00 asset
• Overseas Government pensions; threshold.
• New Zealand registered private
superannuation schemes and life Your home may not be counted as an
insurance annuities (50% is counted as asset if your partner or dependent children
income); live in your home. If your home counts as
• Contributions from relatives; an asset, you probably will not be eligible for
• Earning from interest and bank accounts; a subsidy. However, you may be able to get
an interest -
4Asset Protection & Residential Care Subsidies Govett Quilliam Where Law meets Life
free loan from WINZ instead. The loan must How to apply
be repaid within 12 months if you pass away If you need long term residential care, contact
or when your home is sold, whatever happens the needs assessor in your area. You will need
first. to complete an application.
Payment Govett Quilliam are happy to assist in
The residential care subsidy is paid directly obtaining and filing all requirements for this
to the home or hospital. The amount that is subsidy. We can ensure that your assets are
paid depends on how much you contribute protected to maintain the maximum allowable
to your care. assets.
If you get a subsidy WINZ will need:
If you receive New Zealand superannuation,
a veteran’s pension or income support, most • Proof of your income and assets;
of your payments will go towards your care. • Proof of pre-paid funeral expenses (if you
The rest is paid to you as: have a pre-paid funeral account);
• Your current bank statements;
• A personal allowance of $46.56 a week • Proof of your IRD (tax) number;
(net); • Proof of all assets ever gifted.
• A clothing allowance of $292.02 a year
(non-taxable).
If you have a partner living at home and
they receive New Zealand superannuation,
a veteran’s pension or income support, your
partner may get:
• A special disability allowance of $41.24
net a week to help with extra costs;
• An increase in their payments.
If your partner does not get payments from
WINZ, they may qualify for income support
after you go into care.
If your partner receives New Zealand
superannuation or veteran’s pension they may
qualify for the living alone payment as well.
5Asset Protection & Residential Care Subsidies Govett Quilliam Where Law meets Life
Residential Care Loans
• If your assets are above the $15,000.00 and you are single; or
threshold because you own your $30,000.00 if you are both in care.
own home and you have limited cash
or other assets you may be able to get
an interest free loan from WINZ if: The loan must be repaid within 12 months if
you die or sell the home.
• Your cash or investments are under
Alternatives to a Trust
Tenants in common On the death of the survivor, the first deceased’s
Most people in a marriage relationship or estate would then be distributed in accordance
partnership have traditionally acquired their with the first deceased’s Will. Under present
homes as joint tenants reflecting their joint rules and policies, as the survivor never owns
effort towards the common property. If the deceased’s half share in the property, it is
your property is currently held in your joint not taken into account in the calculations of
names, it is possible to change the form of the rest home subsidy.
ownership into tenants in common in equal
shares. The creation of a tenancy in common Similarly other assets can be dealt with in this
enables you to alter your Will to provide for way including all investments. This gives us
a life interest to the survivor of the deceased the possibility of saving one half of the assets
partner’s one half share. Under the present if the survivor ends up in a rest home. If both
law the survivor never gets to own the whole spouses end up in a rest home, then of course
property outright and one half is always held it will have no effect.
by the first deceased’s estate.
6Asset Protection & Residential Care Subsidies Govett Quilliam Where Law meets Life
The Benefits of the Trust
By transferring your property and investments Trust legally owns the property. There are
to a Trust, the property and investments then time complications and it is initially more
become completely outside of the ownership expensive to structure a Trust and forgiveness
of the individuals gifting into the Trust. This programme. However, the long term benefits
involves the selling of properties to the Trust are substantial and there are many reasons
and then gifting the sum of $27,000.00 per why a Trust could be useful for your family.
annum per single person or in total if per There can never be any cast iron assurances
married couple from monies owing back from that a Trust, even once established, will safe
the Trust to yourselves under the sale. guard any assets it holds from being considered
under the means assessment.
After 1 October 2011 gift duty has been
abolished and the whole amount could be We recommend that you read the Govett
forgiven. However you should discuss this Quilliam Family Trust Guide for further
with your Govett Quilliam legal adviser. The information about discretionary Family Trusts.
7Asset Protection & Residential Care Subsidies Govett Quilliam Where Law meets Life
Enduring Powers We recommend that you read the Govett
Quilliam Guide to Enduring Powers of
of Attorney Attorney in relation to Personal Care and
Welfare and also Property.
Prepaid Funeral You are permitted to each hold $10,000.00
in a prepaid funeral account and this pre-
Account payment will not count as an asset under the
means test.
Wills If you elect either to hold your property as
tenants in common in equal shares or in a
Trust, your Wills need to be revised to take
into account this matter. The Govett Quilliam
Guide on Wills and Estate Administration is
freely available.
8Asset Protection & Residential Care Subsidies Govett Quilliam Where Law meets Life
Further Information
Visit our website to view and download copies
of our other guides and articles written by
our firm, or for further information please
contact us.
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All information in this guide is, to the best of our knowledge, true and accurate but only of a general nature. No
liability is assumed by Govett Quilliam, or its partners or publishers, for any losses suffered by any person relying
directly or indirectly upon this guide. It is recommended that clients should consult a representative of the firm for
specific advice, before acting upon the information contained herein.
9Where law meets life
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