Articles: Trusts and Asset Protection Articles
"Deprivation of Assets: Social Security Act 1964/Social Security (Long Term Residential Care) Regulations 2005" - by Miles Agmen-Smith
© ASCO Legal June 2013
The following are some examples of how, based on the Regulations and based on recent public statements by senior officials from the Ministry, applications for eligibility for long-term residential care government support appears to be assessed at the present time, in straightforward situations, and where there are no other relevant factors.
The following examples relate only to assessments of assets. Assessment of income is also relevant, as are various other matters depending on the circumstances of each application.
This Act relates to matters affecting the Ministry of Social Development, and that is the Ministry referred to below, but some aspects of the decisions on eligibility for subsidised residential care are also determined by the Ministry of Health.
IMPORTANT NOTICE: The Act and Regulations contain discretions, which are determined by the Ministry according to underlying guidelines which are not in the Act or Regulations. These can be changed by the Ministry from time to time.
A recent court decision has interpreted the relevant provision of the Regulations to allow gifting in the sum of $27,000 for a single person or a couple. Therefore it couples gift more than $13,500 each per year, this will be treated as asset deprivation.
Couple A and B are married, or live in a relationship, and were both 53 when they began a gifting program at the rate of $13,500 per year each. This was for a sum of $270,000, $135,000 each, being the amount owed to them by their trust at the time they transferred their house into it, but no other assets. They gifted $13,500 per year each for most of those years and, after 12 years, had gifted to the trust the whole of the amounts owed to each of them.
The lived happily and healthily together for another 22 years. Then, at the same time, they both had major health issues to the extent they were not able to care for themselves and required to be placed in residential care.
In terms of Regulation 9B(a), and in terms of current Ministry policy, those gifts would not amount to “deprivation of property” for the purposes of Section 147A of the Act.
The facts are the same as in Example 1 except that the gifting took place over the 10 years leading up to the date when A and B needed long term residential care.
In that case, the gifting that each made in the last period of between 5 and 6 years (depending on particular dates) would only be treated as exempt at the rate of $6,000 per year and, therefore, 5 years’ worth of gifts at the rate $7,500 per year each would be treated as deprivation of assets, meaning that the amount of A’s and B’s assets would in each case be treated as being $75,000 more than it would otherwise have been for the purpose of these calculations. Therefore, if this took them over the threshold of other allowable assets, then they would need to pay for their own residential care until the remaining capital value of their assets was reduced by their costs to the sum of $75,000 each. (At current rates this would be approximately just over a years’ costs for one person in care in many retirement home facilities.)
If the same couple were in the same circumstances as in Example 2, but had each also set aside $10,000 into a separate funeral trust, this would not have been taken into account, so there would therefore be a further $10,000 each, $20,000 total which would be exempted.
If the facts were the same as in Example 2, but only one of the parties required residential care and the other one was still able to care for himself/herself and except that significant assets in addition to the family home had been transferred into the trust. In that case the total of the gifts they have made, at the rate of $13,500 per year each $27,000 per year total, would be treated when calculating the entitlement of the person who required the care, as if they had been made by only that one person, even though the gifting had been by them both. Accordingly the entitlement of the person applying would be assessed as if he or she had voluntarily deprived themselves of assets at the rate of $27,000 per year for the relevant period, of which half was above the exemption level.
NB: In the case, in this example, there is no clear indication as to how far back in time over the period, starting after the date 5 years before the application is made, during which such gifting will be treated as being doubled up. Under the Act, and depending on the circumstances, the Ministry can and may well go as far back as the first gift. This is a discretionary matter and the exercise of that discretion by the Ministry may vary from time to time.
We have prepared this guide to and for our clients. It is not a substitute for detailed advice as every individual situation differs, and also government policies, laws and general conditions constantly change. We are happy to assist anyone who wishes to obtain more detailed advice or information on these or other matters.
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*Some amounts as shown are changed quite regularly by law changes and other updates.