So, it seems that The Press is not updating the section of the paper I wanted to show you online… BUT, I have contacted the author and she has agreed to let me post it again here. I’d LOVE to know your thoughts…I apologise for the fact I cannot format it to make it all pretty – but it’s the content that counts, right?
Agony Aunt THE PRESS Thursday 24 February 2011
My mother’s funds are dwindling fast. She has dementia and is in a rest home (aged 89). Rest home fees have gone up again and interest rates are not paying enough to pay for mums care. Who can I contact to help?
Nothing seems to rob you quicker than a rest home. But while they appear to gobble money faster than a pokie machine, a good rest home is worth every cent in terms of the care and peace of mind they provide for residents and their families – even more so in the area of dementia services.
If you haven’t taken legal advice earlier in life and protected assets via a family trust or regular gifting, your Mum’s financial position will be exposed to both asset testing and income testing when it comes to residential care. Even a trust isn’t totally fool-proof, as Work and Income can ask for Trust documents and will decide if assets should still be counted. There is no legal limit on how long they can look back, but it tends to be about five years. Later this year gifting rules will be abolished, allowing assets to be gifted into a trust all at once. It doesn’t take much nouse to guess that Work and Income will watch that trick like hawks. Their gifting rules are different to those used by the IRD.
If your Mum is single with more than $200,000 of assets, or her income is too high, she will be paying from her own pocket (see the panel opposite for the limits). A financial adviser can review her investments, but if it still doesn’t cover the costs of care, she will have to start using her capital. Your first port of call should be to the Department of Work and Income and they’ll tell you if she qualifies for the Residential Care Subsidy. If she does, the taxpayer will pick up the tab.
Beware though, even if she is ‘asset poor’, they will also look at her income levels, as some people have private pensions or income from a family trust. This income will be used to pay for care.
If she is deemed too wealthy, the maximum she will have to contribute from her own money is $814 a week in Christchurch or $840 a week in Wellington. For those who are in care and need to sell their house to pay rest home fees, there are interest-free Residential Care Loans available to bridge the gap until the sale takes place.
Ringing around a few facilities which provide Dementia care (such as Bupa) I found the daily cost was a standard $116 ($42,000 a year). Others in my quick straw poll had rooms which ranged from $116 up to $136 a day with an ensuite and small courtyard ($50,000 a year) and hospital rooms reached $73,000+ a year. It makes you suck in your cheeks. It wouldn’t take many years to chomp through the value of a family home at these prices. On the upside, at least you can keep $200,000 of your savings and the taxpayer picks up the rest of your bill.
Interestingly, many more families could find themselves in your position in future. The number of beds required for dementia patients is expected to grow from 2,800 to 7,200 over the next 15 years in New Zealand. That’s an increase of 160%. These numbers come from a recent report by advisory firm Grant Thornton. Dementia services are projected to be the fastest growing area of residential care, given our aging population. It leads me to the conclusion that Trust experts can look forward to a steady flow of clients wishing to protect inheritances being devoured by rest home fees later in life.
Email questions to email@example.com, subject line: Financial Agony Aunt. Anonymity is guaranteed.
Janine Starks is Co-Managing Director of Liontamer Investments. Opinions in this column represent her personal views and are not made on behalf of Liontamer. These opinions are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product. Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.
The government will pay for your residential care if:
1. You have been assessed by the Ministry of Health as needing rest-home or hospital care. A ‘needs-assessor’ can be contacted on 0800 737 777 2. You pass the ‘asset test’ for those over age 65 (see below). Phone the ‘Residential Subsidy Unit’ at the Department of Work and Income on 0800 999 727
3. You pass the ‘income test’. You are allowed to keep income of $897 a year if you are single, plus a fortnightly allowance of $83 and a clothing allowance of $251 a year. NZ Super payments, interest, trust income and 50% of private pensions must be put towards your care.
4. The is no asset test for those aged 50-64
What counts as an ‘asset’?
• Cash savings, shares, bonds, loans to other people or trusts, rental properties, campervans, boats, your house and car
What doesn’t count as an ‘asset’?
• Your house and car, if your spouse is still living independently; clothes; jewellery; furniture; pre-paid funeral expenses
How the asset test works
• Single: your assets must be $200,000 or less
• Couple, both needing care: combined assets must be $200,000 or less
• Couple, one of you needs care: you can continue to own your home and car, but other assets must be $105,000 or less. Alternatively you can use the $200,000 test, but your house and car will be added in (this test would help those renting)
• On 1 July each year the limits above all increase by $10,000