If you go into long term residential care (ie a rest home), then you may be eligible for a residential care subsidy from the Government.
As such here we answer some common questions we receive about the residential care subsidy.
Can you gift your assets away?
Prior to 2011 if you gifted over $27,000 in one year you had to pay gift duty on the amounts over $27,000. In 2011 Gift Duty was abolished, so you can now gift any amount now without incurring tax. However, this did not abolish the gifting limit for residential care subsidy purposes. For residential care subsidy purpose if you gift over $27,000 in one year then any amount you have gifted over that amount is still considered your asset and added on to other assets in your personal name.
Can you spread your gifting over several years?
If it is within 5 years of you applying for the residential care subsidy then yes you can. However, before then then no you cannot. For example, if you gift $270,000 in one year you cannot spread that gift over the next 10 years. This means that $243,000 of this is still considered your asset and would make you ineligible for residential care subsidy.
Can the Ministry of Social Development ask your Trust to contribute to your cost of care?
Yes, the Ministry will ask what support the Trust will give and will take into account whether or not the Trust will assist you in determining how much subsidy you receive.
What happens if the Trust refuses to assist with care?
If you are ineligible for the subsidy or the level of subsidy is not enough the cost of care then you need to figure out options for funding your care as the rest home will still expect the full cost for the room to be paid.
Does making loans to family members affect the residential care subsidy?
Yes. If you have made any loans you have to declare them as part of your application. They are then taken into account by MSD for income testing purposes and determining the level of subsidy you might receive.
In particular the income you earn off the loan via interest charged is taking into account for income testing purposes. If you are not charging interest on the loan or have given it interest free, then MSD will nominate the interest that should be charged on the loan and say that you are depriving yourself of that income. The amount you are depriving yourself of will be added to your actual income and will be reduce amount you receive.
What if you have a contracting out agreement?
Having a contracting out agreement with your partner or spouse is not taken. So regardless of if it says your assets are x and your partner or spouses are y, these assets are still pooled together for asset testing purposes.