The Ministry of Social Development are scrutinising applications for residential care subsidies. They are now, more than ever, expressing that people are required to look to their own resources first before asking the state to pay.
Since the abolition of gift duty in 2011, the Ministry of Social Development (Ministry) has significantly changed its policy relating to residential care subsidy assessments. Long established and previously accepted practices are no longer standing up to the Ministry's scrutiny when a person applies for a residential care subsidy. The unwavering and explicit message from the Ministry is that people are required to look to their own resources first before calling on the state to pay.
- The social security system is a safety net to provide support when there is a genuine need. It is not appropriate for individuals to make provision for their adult children and grandchildren from the resources available to them and then call on the State to provide them with assistance for their own support.
 NZSSAA 74, para 31
Once a person is assessed as needing long-term residential care, the Ministry carries out a financial means assessment. This comprises an asset test and an income test.
If an applicant's assets are equal to or below the applicable asset threshold (currently $218,423.00), the applicant qualifies for Government funding. Assets tested include licences to occupy (common with Retirement Villages), the value of gifts made, and loans to individuals and entities (including family trusts).
The income test determines what the applicant must contribute to the cost of their care. The definition of income in this context is very wide and includes:
- Any interest or dividends
- Family trust income
- Estate income
- Life interest income
- Rental income
- 50% of any private superannuation or life insurance annuities received by the applicant or the applicant's spouse or partner
When the Ministry refers to income, it means income that is received or receivable (meaning it has not been received but could or should have been received). The Ministry can assess actual trust income that is not paid out. It can also charge notional income when the Ministry considers income returns from an asset are not reasonable.
If an applicant's assets or income have been directly or indirectly disposed of, the Ministry considers this deprivation. This includes the gifting or selling income bearing assets and re-arranging financial circumstances that have the result of reducing income or assets. The Ministry is not concerned with the purpose behind the restructuring; it is only concerned with the outcome.
The change in policy has seen the Ministry looking back to ascertain what an applicant did with their assets well beyond the time of the policy change in 2011.
What does this mean to you?
If you have any questions on how you have structured your affairs including if you have made provision for a life interest in your Will or if you have granted a similar right in a property, we encourage you to contact us to review your structure.
Similarly, if you have any questions about the best structure for you, we have many options available that may suit your circumstances. Our specialist Estates Team will be more than happy to assist.
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