Rest Home Subsidies

Family Trusts may be used to assist families to retain their assets which might otherwisehave to be applied towards rest home fees.

The problem is, as will be well known, that if you have to go into a rest home your own assets must be used for the rest home fees until they are reduced to certain minimum levels.

The problem is even more acute in many ways if one of a couple goes into a rest home as the law requires that even if the parties keep their money separate the "surviving" spouse or partner must reduce his or her assets to a very low threshold level before a rest home subsidy is paid.

The method of calculating what assets may be retained and what assets will be taken into account by WINZ in assessing entitlement for the residential care subsidy are quite complex and as the figures vary from time to time it would be best to make enquiry at a WINZ office for the current edition of the residential care subsidy leaflet, In our opinion, the message is clear that if you have assets in your name then you will be expected to use those towards the cost of your residential care until they are reduced to a very low level.

The Government has signalled that this threshold will increase by $10,000.00 per year. It is fair to say that there is nothing to prevent the Government back-tracking on this particular indication.

Even though the threshold level is rather more generous than it used to be, there are still two very obvious results –

• the distress which this policy causes, particularly I think for the "surviving" spouse; and 
• the fact that funds which might have otherwise been passed to children, and

which in many cases a person wants to pass to children, have been used up on rest home fees. There is another problem here from the Social Security Act. The Department may refuse to grant a benefit, or may terminate or reduce a benefit already granted, if it is satisfied that an Applicant has "directly or indirectly deprived himself of any income or property which results in his qualifying for that or any other benefit or an increased rate of benefit".

A rest home subsidy is a benefit for this purpose.

In simple terms, if the Department thinks that you have given your property away and the result is that you then qualify for a benefit, you won't get it. The Department will say that you have directly deprived yourself of the property.

The application form for rest home subsidy seeks disclosure of all transactions back for at least 5 years.

That is only however the Department's policy approach. The law contains no such limitation and the Department can go back as long as they want if they wish to.

What follows from this policy is quite clearly that an attempt to organise ones affairs by disposing of assets, or setting up trusts, shortly before going into a rest home is a complete waste of time and money. It will be very unlikely to pass the scrutiny of the Department.

Furthermore the probability is long delays in payment of subsidies and probably financial embarrassment as a result. In some cases children who have received gifts have been required in effect to pay them back.

But the Department will have much more difficulty in challenging transactions which have been entered into in the normal course of business or family affairs. The more years that have gone by since a particular arrangement was set up, the more difficulty will they have.

If the Trust etc was set up more than 5 years prior to the application they may not even ask, although it has to be said that if an applicant is in receipt of an income from a trust that will have to be disclosed and therefore so will the existence of the trust.

The message therefore is this -

• It cannot be guaranteed that a Family Trust will stand up to a wholesale examination from the Department.
• The earlier in life that it is established the greater the chance of meeting scrutiny from the WINZ.
• To leave it until retirement, or worse still, pending move to an old peoples’ home, it is likely to be at best much less effective, and probably totally ineffective.