Residential care: get advice earlier rather than later
If there is one issue that gets people ”going”, it is when they, or their elderly relatives, hit the rest-home system and the spectre of residential care subsidies/charges and asset/income thresholds appears on the horizon.
A common response, particularly from ”middle NZ”, is along lines of ”I have paid taxes and worked hard all my life, and now the Government should be looking after me, not stealing what I have built up for my children”.
Said children tend to have an aligned, if not more self-interested, view on the matter.
In principle, the provision of residential care to the elderly by the State is designed to be ”needs” based, in a financial sense.
Those with the ability to pay for it themselves should, while those who cannot should be assisted.
Sure, universal superannuation confuses that perspective a little, but effectively means-testing via thresholds is the founding principle on which most of our social assistance infrastructure is built.
Whether or not those thresholds, such as the couple asset threshold (where one is in care) of $123,000 plus car, house and pre-paid funeral, are appropriate is a whole different debate, well beyond the scope of this column.
However, it’s been a big month so far for those folk who are in residential care, or are likely to be.
Firstly, on July 1, the weekly contribution rate for those 11,070 residents who are not government-funded went up by about $90 to a maximum $1063. This is primarily a direct result of the recent successful staff pay equity claim, plus a small adjustment for inflation.
Secondly, the High Court has released its ruling in the Broadbent case, which focused on whether the Government could take into account, for the purposes of calculating whether a person’s income threshold has been breached, not only the income they derive in their own name, but also the income theoretically/actually derived on assets they had disposed of by way of gifts, in this case, to a trust.
The court held that this calculation of fictitious income was not valid for the purposes of the income component of the residential care subsidy calculations.
A gift was a gift, and future income is that of the giftee.
The whole matter of depriving oneself of assets, usually to a trust, in a manner that over time reduces those assets counted for the asset threshold is a vexed and complicated one.
The income test is also consequentially impacted by deprivation of income-earning assets.
There are both ”last 5 years” ($6000 pa) and ”historical” ($27,000 per couple pa) disposition-by-way-of-gift limits that need to be taken into account as at the date of subsidy assessment.
Interestingly, many people have already breached the historical annual limits due to a mismatch between gift duty legislation ($54,000 per couple), and what is in hindsight allowed for under the subsidy assessment criteria ($27,000 per couple).
Furthermore, upon the removal of gift duty in 2011, many loans were simply forgiven to trusts, which essentially exposed the bulk of those loan forgiveness amounts to the so-called rest-home subsidy clawback rules.
The reality is that somewhere around 6-8% of us will end up in residential care, and even then our likely stay is on average likely to be shorter, as health assessment criteria continue to be tougher.
Notwithstanding ethical matters, one could argue this is perhaps not the issue we think it is, until of course it affects your family.
Micro vs. macro view, perhaps?
Either way, if you are worried about it, seek advice earlier rather than later.