Geriatric care means testing rules

Income thresholds

Under the Residential Care and Disability Support Services Act 2018 and the Residential Care and Disability Support Services Regulations 2018, most income is means tested. From 1 July 2022 income does not include any money that your spouse/partner has earned through employment; income from assets when the income is under $1,114 a year for single people, $2,228 a year for a couple when both have been assessed as requiring care, $3,341 a year for a couple where one spouse/partner has been assessed as requiring care; a War Disablement Pension from New Zealand or any other Commonwealth country. They will include as income: New Zealand Superannuation, Veteran's Pension or any other benefit, 50% of private superannuation payments, 50% of life insurance annuities, Overseas Government pensions, Contributions from relatives, Earnings from interest and bank accounts, Investments, business or employment, Income or payments from a trust or estate.

Asset thresholds

Under the Residential Care and Disability Support Services Act 2018 and the Residential Care and Disability Support Services Regulations 2018 assets are means tested until assets fall below the following amounts. For the year from 1 July 2022 to 30 June 2023, the asset limits are:

• If the person has a partner who is not in care, they can choose EITHER

o a maximum of $256,554 including their home (principal place of residence) and a car (Threshold A), OR

o $140,495 not including their home and car (Threshold B).

• If the person does not have a partner in the community or has a partner who is also in care, then the asset limit is $256,554 (Threshold A only).

These limits are increased by the rise in the consumer price index (CPI) increases on 1 July every year thereafter.

What is meant by "assets"?

"Assets" generally include all assets of the applicant and their spouse capable of being realised. There are however some specific exclusions.

Exempt assets

There are a number of assets which are not counted in the financial means assessment. For example, "exempt assets" include:

o Household furniture and personal belongings, e.g. clothing and jewellery;

o Up to $10,000 per person of pre-paid funeral expenses;

o The home and car if Threshold B is chosen.

Please note that each spouse, whether one or both are in care, may have up to $10,000 per person of prepaid funeral expenses exempted. See the Regulations for a full list of exempt assets.

Exempt home

The client's home may be an exempt asset if the client's partner still lives in it, as long as it was their "principal place of residence" before the client entered care (refer to the asset thresholds above). This can include a home owned absolutely, a life interest in a home or a licence to occupy a home (e.g. in a retirement village).

The debt asset owed on the transfer of a family home to a trust or other family member cannot be the client's "exempt home" under Threshold B. The house has been sold and is owned by another party. It no longer belongs to the client. The resulting debt is not "an interest in a residential dwelling" and so is not considered an exempt home.

The value of the assets must be determined on the date the application is received (section 145 of the Act). However, financial eligibility to the subsidy may be backdated to the date on which the client first became eligible in the last 90 days, or entered care, whichever is later (section 147(4) of the Act).

Under the Regulations, each gift of $27,000 in total per year per single applicant or per couple for the residential care subsidy is safe if it is made more than 5 years before applying for the Residential Care subsidy. In addition, you can gift up to $6,000 per year per application in the 5 years before the application without it affecting your financial means assessment. The excess is treated as deprivation of assets and is usually added back, and treated as your assets.

Placing your assets in a trust pegs the value of those assets at today's values, and gifting at $27,000 per person per year maximises the exemptions available if you go into geriatric care.