While many of us work for a lifetime to accumulate the funds needed for a comfortable retirement, residential care costs can put us in a difficult position. Because of this, the Ministry of Health offers residential care subsidies to qualified individuals. Getting access to these, however, involves a complex application process and not everyone qualifies. Therefore, it can be a good idea to work with a professional when it comes to assessing your options.

Who can get residential care subsidies?

Subsidies are provided to patients receiving contracted care services who are 65 or older, or between 50-64, provided that they have no spouse or dependent children. Additionally, they need to demonstrate financial need and require care for an indefinite length of time.

Those who qualify will have a portion of their costs covered directly by the Ministry of Health. This means that payments are made directly to the care institution, leaving the patient to cover the remainder of the cost.

Types of residential care

Residential care isn’t one particular thing, but rather describes a set of institutions that provide varying types of care for people with various types of conditions. Qualifying types of residential care institutions include:

• Rest Homes, which offer care for people who can manage some daily tasks, but require assistance with regards to personal care
• Long Stay Hospitals, which provide long term care for people with disabilities or significant medical problems
• Dementia Units, which care for those suffering from dementia or other mental illnesses
• Psycho-Geriatric Units, which provide a high level of specialist care for people with serious conditions such as severe dementia or addictions

Applying for a subsidy

In order to apply for a residential care subsidy, you’ll need to go through a process to assess your income, assets, and needs before paying out an appropriate portion of your costs. Specifically, the process is as follows:

Booking a needs assessment

The first step is to book a needs assessment. If you’re under 65, you’ll also need to fill out a financial means assessment form at your appointment.

Asset check

The Ministry of Social Development will check your assets, which include cash, securities, loans, investment properties, boats, and recreational vehicles to ensure that their assessed value falls below the required limits.

If a person’s assets are equal to or below the asset threshold, they qualify for Government funding (the residential care subsidy) to pay for most of the cost of their care.

An income test will then determine what the person must contribute to the cost of their care. The level of subsidy will depend on the type of care the person is assessed as requiring.

There are two of these asset thresholds at $236,336 for singles or couples when both partners are in care, and $129,423 for couples where one partner is in care.

In the assessment, your family home and personal vehicle are only included as assets if you don’t have a partner, you are both in residential care, or your partner is not in residential care, but you’ve chosen to have your assets assessed against the greater $236,336 threshold.

A prepaid funeral of up to $10,000 is an exempt asset. Personal belongings including clothing, jewellery, household furniture and effects are also exempt assets.

Checking what assets have been gifted or sold

You’ll be required to report assets that you’ve gifted to others. If the total assets gifted in any given year exceed $6500 in value, they may be counted as assets. If these gifts were given away more than five years ago, that value threshold goes up to $32,000 per year.

Income check

If your assets are valued below the required asset limits, your income will be assessed to ensure that it also falls below the required limits. Income includes New Zealand superannuation, veteran’s pensions, overseas Government pensions, investment earnings and interest, payments from a trust or estate, and half any life insurance policies and private superannuation payments. It does not include your partner’s earnings or income from assets that falls below certain thresholds.

Determining a start date

For those under the age of 65, it can be paid from either the day you were assessed as needing care, or the date you entered care. If you are over 65, the subsidy can be paid from up to 90 days before your application is received. This doesn’t mean, however, that you can suspend payments during the application process – you’ll continue to be required  to pay for care up until the subsidy has been approved.

After that, all relevant parties are notified, and the Ministry of Health begins issuing payments to the care institution.

If you are thinking ahead and preparing for a time when you might need to protect the things you care about, we have a number of ways that we can help. Please don’t hesitate to reach out to one of our Private Wealth team.