One of the most vexing questions that we face as we get older is how we will provide for ourselves into our retirement. This necessarily includes planning to ensure that we have sufficient funds to meet our costs in the event that we are placed into long-term residential care or a rest home. In order to determine how much we will have to contribute to the costs of long-term residential care, we need to be aware of the maximum assets threshold, above which we will no longer be eligible for a residential care subsidy (‘Subsidy’).
The Subsidy assets threshold is reassessed on 1 July each year. From 1 July 2013, the Subsidy assets threshold has been set at $215,132 for single people or for couples who are both in residential care. For a couple where only one of them is in residential care, the combined assets threshold for the Subsidy is $117,811, when the value of the home and car is excluded, or otherwise $215,132. Couples can only elect to have their home excluded from the Subsidy assessment where it is the principal residence of either a dependent child or the spouse or partner who is not in residential care.
In assessing the eligibility for the Subsidy, Work and Income New Zealand (‘WINZ’) may include in your assets any gifts that you have made of more than $6,000 per annum over the preceding 5 years. WINZ may also include in your assets any one-off gifts of over $27,000 per couple made prior to that 5 year period.
You can apply for a reassessment of your eligibility for the Subsidy, if at any time your assets have decreased below the maximum assets threshold for the Subsidy.
For those people who have assets above the applicable maximum assets threshold and accordingly, do not qualify for the Subsidy, WINZ offer a residential care loan scheme (‘Loan’).
The Loan is interest free and secured by a caveat registered over the borrower’s home. This caveat prevents the property being sold until the debt owed to WINZ has been repaid in full.
The Loan can be drawn down at the rate of the maximum contribution towards residential care costs. From 1 July 2013, the maximum contribution ranges from $819 to $900 per week depending on where you reside. This equates to between $42,588 and $46,800 for each 12 month period spent in residential care, while you remain ineligible for the Subsidy.
The Loan has to be repaid, either within six months of the death of the borrower or when the home is sold, whichever comes first.
Given that the maximum assets threshold for the Subsidy is very modest, and that the maximum weekly contributions under the Loan scheme is significant, it is imperative that planning for retirement and asset protection begins as early as possible.