The Government provides financial assistance for elderly people who need long-term residential care in a rest home or hospital.
This is done through a "Residential Care Subsidy". The subsidy is provided by the Ministry of Health, although Work and Income (the government agency that administers benefits) is responsible for assessing your assets and income.
The following are the requirements for the Residential Care Subsidy:
However, the limits on your income and assets don’t apply if you need residential care because you have been the victim of a crime.
To apply for the subsidy, you should do the following:
Send your application to:
The subsidy is paid directly to the rest home or hospital, and exactly how much is paid will depend on how much you contribute to your care from your own income. If you receive NZ Superannuation or a Veterans Pension or another form of Government income support, most of this will go towards the cost of your care. The rest is then paid directly to you as a weekly Personal Allowance. You will also receive an annual Clothing Allowance.
If you don't qualify for the Residential Care Subsidy because your assets are above the limit, you will have to pay for the cost of your care from your own income and assets, but only up to a maximum contribution that is set for each region by the Ministry of Health.
If the cost of your care is more than your contribution, the local District Health Board pays the difference.
From 1 July 2006 to 30 June 2007, if you are 65 or older then to qualify for the subsidy you must not have assets worth more than -
If you're eligible for the subsidy because you're aged between 50 and 65, and single with no dependent children, you're not subject to the asset test. You are subject only to a means assessment of your income to determine whether you will have to pay a contribution towards the cost of your care.
Your "assets" for this purpose include:
Not included in your assets are:
The home won't be counted if your spouse, partner or dependent child lives in it. It will be counted if you are single, or if your spouse or partner has died, or if both you and your spouse or partner are in long-term residential care.
(Before 1 April 2007, "partner" included only a civil union partner, and "single" meant someone who is not married or in a civil union, so that someone in a de facto relationship was "single" for the purpose of the Residential Care Subsidy. From 1 April 2007, the meaning of "partner" includes both a civil union partner and a de facto partner, and "single" has a corresponding meaning so that a "single" person is someone who is neither married nor in a civil union or de facto relationship.)
If you don’t qualify for the subsidy because your home is counted as an asset, Work and Income may lend you the subsidy as an interest-free loan. The loan is repaid when you sell your home, or is repaid out of your estate when you die. In some cases Work and Income won’t require you to pay the loan back immediately after you sell the house.
While Work and Income is entitled to charge interest on the loan, they will probably do this only if you delay selling the home unnecessarily.
There is a section in the subsidy application form for you to fill out if you wish to apply for an interest-free loan.
One of the ways in which you can preserve your assets for your family and still be eligible for the Residential Care Subsidy is to gift off some of your assets directly to your children or other family members. Another way is to set up a family trust for the benefit of family members, and then transfer your assets to the trust (for how to do this, see How to set up a family trust).
The assessment of your assets ignores any gifts made more than five years before you apply. You should therefore aim to have completed the process of gifting your assets to your family members or family trust at least five years before you apply for the subsidy.
If you have made any gifts within the previous five years that total more than $5,000 in any one year, the excess over $5,000 a year is treated as part of your assets when you apply for the Residential Care Subsidy, even though you no longer in fact have that asset.
You get the benefit of the $5,000 a year deduction for each year since you made the gift. So if you gifted $30,000 four years ago, you get the benefit of a $20,000 deduction (four times $5,000), and only $10,000 of the gift is assessed as part of your current personal assets.
This means you are allowed to gift up to $25,000 over those five years. A husband and wife can each gift off this amount, so a couple can preserve $50,000 of their estate for the benefit of their children if they then have to go into residential care.
One option is to gift the $5,000 maximum each year by way of a specially worded Deed of Gift. In this way, no cash need change hands before you leave your house and enter into residential care. In the meantime, the amount gifted accrues against your property annually as a debt, and is paid out only when the property is sold and you are transferred into residential care. You should consult a lawyer if you wish to explore this option.
In certain cases Work and Income may allow you to take advantage of the $5,000-for-five-years rule retrospectively (for example, allow you to gift $25,000 now as if you had done so over five years). But this applies only if you were receiving a high-level of care (essentially 24-hour care) before you applied for the subsidy.
You should be aware that Work and Income have legal power under the SOCIAL SECURITY ACT 1964 to review gifts going back as far as they like. If they think you made a gift, whenever it was made, with the intention of reducing your assets so that you would qualify for a government benefit or subsidy, they can decide to assess your personal assets as including this gift. In the case of gifts made to a trust, it's therefore important that the trust be set up for other valid reasons (such as benefiting family members) and that those reasons are documented.
There are no limits on the income you can earn, but any income you do earn will go towards the costs of your care, up to a weekly maximum.
Work and Income can review your income assessment each year - or at any time if they have reason to think your income has changed or is about to change.
"Income" includes:
Your spouse's or partner's income is generally included in the assessment of your income. (See the note, under "What are counted as `assets'?" above, about the changed meaning of "partner" from 1 April 2007.)