Many people undertake asset and estate planning with the hope that the arrangements entered into will protect assets so that they will not be counted for residential care subsidy purposes. The success or not of these measures depends on timing and require careful understanding and appreciation of how the relevant thresholds are applied. See gifts and residential care subsidies.
Further care in this area is now required due to changes as part of Budget 2012, which include an amendment to the asset threshold for residential care subsidies. Previously the asset threshold used to determine a person’s entitlement to a residential care subsidy increased by $10,000 every year on 1 July. The current limit is $210,000 or $115,000 plus the family home and car. Under new rules, the thresholds will increase by the consumer price index each year, rather than by $10,000 per year, which has been the case for some years. This means that the asset thresholds, which would have increased to $220,000 and $125,000 respectively on 1 July 2012 will now increase to the lesser amounts of $213, 297 and $116,806 (See amending legislation). The $210,000 limit, which will increase to $213,297 applies to a single person or a couple in care. The option of the lower limit, plus the house and car can be chosen by a couple where only one partner is in long-term care. The changes to the thresholds mean that it will take longer for some applicants to become eligible for a residential care subsidy. Criticism has been leveled as the low key way in which the threshold amendments were announced. While for some, the amendments will mean that subsidy eligibility will be delayed for some time, it could be argued that a much stronger stance could have been taken given the pressure the residential care budget is being subject to as the New Zealand population continues to age. Regardless, as a practical matter, considered asset and estate planning will ensure that for the time being residential care subsidies will be available to those who plan carefully for the eventuality of long-term residential care. Whether or not this should be the case is a complex matter deserving of wider social debate.