Residential Care Subsidies

It is becoming increasingly difficult to place yourself in a position of being entitled to a residential care subsidy through gifting your assets into a trust.  While gift duty has been abolished as from 1 October 2011, the Ministry of Social Development's residential care policy is remaining unchanged. Your gifts may still be clawed back and added to your total assets in a financial means assessment. For further information on gifting and the residential care subsidy, please see our article Abolition of Gift Duty and Your Trust.

Life interests created through Wills can often be an effective means of enabling the surviving spouse to obtain a residential care subsidy through having only half of what were the joint assets taken into account in the residential care subsidy application.

For example:

2. They establish life interest Wills and change the ownership of the house into a tenancy in common where each of them has a distinct half share and divide the term deposit equally between them.

Without the life interest Wills and the divided assets survivorship would apply and all of the cash ($500,000) would be in Mary's name. It would be a long time before she could successfully apply for a WINZ subsidy.

A deed should be completed between the couple creating life interest Wills whereby it is agreed that neither one will alter their Will to remove the life interest without the consent of the other.

Two trustees are required in each Will to ensure that the interest in the estate of the first of the couple to die is kept separate from the survivor's interest in any jointly held property.

Usually a survivor has reasonably full use of the assets in the deceased spouse/partner's estate for their lifetime and the income from them.

For further information, or to discuss life interest wills please contact Tony Fortune, Lauren Corbett, Michelle Moore, Katherine McCarthy or Cleo Shortland.

September 2011