By Janine Starks* (email)
From my mailbag: 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 nous to guess that Work and Income will watch that trick like hawks. Their gifting rules are different to those used by the IRD.
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 7772. 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 7273. 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 50-64What counts as an ‘asset’?· Cash savings, shares, bonds, loans to other people or trusts, rental properties, campervans, boats, your house and carWhat doesn’t count as an ‘asset’?· Your house and car, if your spouse is still living independently; clothes; jewellery; furniture; pre-paid funeral expensesHow 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 |
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.
Baby steps
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. (See 2011 benefit rates here). 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.
Greying nation
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.
*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.
32 Comments
The trick is to recognise the first marble rolling away...then it's off on a big boat trip to blow the lot on booze and sunshine...if you fail to cark it on the journey...try a bottle of rum and coke with sleeping pill flavouring mid winter in your garden, which you mortgaged heavily to by the booze on the boat.
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"On the upside, at least you can keep $200,000 of your savings and the taxpayer picks up the rest of your bill."
So what's the upside for the taxpayer, then?
"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."
Is this an extended typo? Surely you meant to say:
“It leads me to the conclusion that Trust experts can look forward to a steady flow of clients wishing to selfishly suck the life out of younger taxpayers and deprive them of adequate healthcare, education, leisure, opportunities and choice.”
"Nothing seems to rob you quicker than a rest home."
WTF? How can paying for the service provided by a rest home be equated with being robbed? When the taxpayer doesn't subsidise your holiday accommodation or the icecream you bought from the dairy, do you consider yourself to have been robbed?
Again, you surely meant to say something like this:
“Nothing seems to rob the hapless taxpayer quicker than the wealthy elderly and their families obtaining subsidies they do not need for services they can pay for themselves."
"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%."
All the more reason to put an end to the elderly seeking unneeded subsidies from the taxpayer, surely. You have written your article in a manner that suggests the people paying for this (the young and the not so well off) are invisible to you. I'm sort of sickened by it.
The govt should have the power to look through trusts in these cases. It is totally inequitable that one old dear gets to use her assets up but the next one gets to leave the family trust untouched, collecting a full subsidy. Rest home charges are a prvate good and the individual should pay until they have used up their or their share of a trust's resources. I don't understand why people get so obsessed with leaving assets for their children.
Spoke with a childless 90 year old Uncle in the UK the other day. My Aunt is now in a home.
They have lived modestly all of their lives - 'playing the game' saving for old age.... 900 sterling a week to keep Aunt in some semblance of a normal life. He said he wished that he'd spent more instead of saving it all.... I couldn't help wondering, in an extremely perverse way, if money would dictate Aunties lifespan...
Let's just line up a few ducks here : The NZ Gov't can biff $ 36 million into a rich pricks' yacht race / $ 60 or $ 100 million into a rugby tournament / a $ billion or so into bailing out SCF's bond-holders / hundreds of millions into bribing a Hollywood film studio , to film the " Hobbit " here / ....... yadda bloody yadda bail-out of the idiotic , the fat-headedly stupid , and the already rich buggers ........
...... but we snap & snarl over providing some end-of-life care for those citizens who have been diligent , honest , and who have paid their taxes ?
Oh no I'm not ! ........ This current government has shown the same disrespect for tax-payers' munny as the previous one . Now , we all expect Labour to be massive wastrals with the public purse , but it's truely gob-smacking to see a National government equally as irresponsible .
...... Vote ACT !
The world has been turned on its head since labour ruled. We're throwing money at pie-in-the-sky gambles such as cycle ways, in a effort to kept people employed (unemployment growth will sink us) and create growth. RWC, the Hobbit movies and America's cup have all proven winners in the past and are a good bet to deliver again...i'd take that bet.
You are joking of course right?! Who will get rich out of those three events? A small number of highly connected people right at the very top who will then stash their loot away in taxhavens like they always do already.
The America's Cup was supposed to 'put NZ on the map!' and make us all rich. That's what we have been told for how long now? 25 years or even longer? And who got rich(er)? Some boatbuilders maybe, certainly the top of the top business people with yachting circle connections. The rest of us just kept on donating so that some rich guys could continue their lifestyle of messing about on boats without being burdened with the nuisance of paying their own way in life.
Remember back in 1990 when we were all going to get rich from hosting the Commonwealth games? What, you don't even remember the 1990 Commonwealth games? They were held in Auckland and no-one got rich out of it except - GASP! - those connected businessmen with Cayman Islands bank accounts. Auckland (and Aucklanders) was still paying off the debt from the games almost 20 years later.
RWC? Don't make me LOL. How will they be any different? More massive costs, more debt, more disruption, more hype, more fantasy. More disappointment and shattered dreams of fame and fortune by all except the connected businesstypes at the top. Again.
SCF? How does throwing our tax dollars at no-hoper get-rich-quick losers make us wealthy and successful? You may have noticed some are calling for increased attention to the identities of some of the SCF lucky ducks who scored the tax parachute, to see if maybe they have intimate connections with out fearless leaders. That's because the SCF bailout made no sense from any other perspective. SCF was totally lose-lose for everyone other than highly connected people at the very top. (Some mum and dad investors got lucky too, but it really was luck, otherwise they would not have seen a bean, just like the other poor dumb greedy saps who got fleeced by finance cos.)
Then we see the Warners bribe, just like GBH said. It was not a 'deal sweetener' or an 'incentive'. A greedy and gutless govt caved at the thought of losing their personal cut from a big Hollywood studio. Do you think anyone will benefit besides Warners, Peter Jackson, some one-day-retired senior pollies and certain connected NZ business people at the very top with offshore accounts? If you do you're a naive fool.
One argument always raised in favour of such financial chicanery is that a few people will have jobs so NZ will come out better, but who is to say those people wouldn't have found some other job? And it wouldn't have cost NZ *as a whole* such a vast amount of our already small and dwindling resources. Wipe away the hype and publicity smokescreens and you always find the same thing: a very few already rich people creaming all the profit while 99.9% of NZ carries the cost. And those creamed off profits disappear someplace where the only ones enjoying them are the top of the heap and their suntanned foreign bankers.
So as I said --- for once we are mostly in agreement with Mr GBH, something that doesn't happen very often!
LOL.
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If you're someone who is using trusts to obtain rest home subsidies, you have probably also used trusts to obtain WFF, to enable your children to qualify for student allowances, and to reduce your tax to an artificially low level. In other words you are probably not a diligent, honest person who has paid your share of taxes. I am sympathetic to people paying as little tax as they can, because I increasingly see that taxes (at least on some) are too high and are misspent in exactly the manner you describe (you've left out Creative NZ, by the way). But being allowed to organise your affairs so that you can be the recipient of other taxpayers' diligent, honest efforts is not acceptable. I am not in fact particularly critical of people of who do organise their affairs in this manner – I'm not sure that I wouldn't do that if I could, but it needs to be stopped. I am repulsed, though, by the sense of unquestioning entitlement, untroubled by any sense of morality (and perfectly encapsulated in this article by Janine Starks), that seems to accompany this use of trusts to obtain taxpayer subsidies.
I would like to know:-
1. What percentage of the elderly actually receives rest home/ hospital level care?
2. What is the average length of time spent in care? I think I read once it was about 18 months, but I'm not 100% sure on that.
3. Has the average length of stay increased or lessened over the last 20 years?
4. Is it cheaper to put the elderly in care or support them at home?
5. What is the annual spend on Rest Home Subsidies at the moment?
I think without some hard numbers to crunch and go by a lot of these arguments are just knee jerk reactions.
Dementia, I'm sorry to say it if you didn't know, is a terminal condition. The average person diagnosed with a dementia will die from it within about 7 years. Some will die much sooner, whereas others may live as long as 20 years. Hopefully if better treatments can be found, it might keep people with dementia well for longer so they don’t require residential care, or don’t require it for so long. At that age they are susceptible to dying from a whole range of other conditions.
No URL's Steven, just a lifetime of knowledge.
Pretty much all diseases are lifestyle related, with nutrition being the corner stone.
I doubt it would be hard to find natural remedies for most ailments with a google search.
Classic example is heart disease, which is unknown amongst eskimos until they are put on a western diet. The key ingredient was isolated considerable time ago (50+years?), the fact they eat a diet of raw fish high in unsaturated oils. Now popularised by the Omega 3's they contain.
While I can accept say smoking cause early death and other serious health problems Ive never seen anything on dementia except maybe a link to aliminium....maybe, tenious at best and that was something like a decade ago.....
Sure heart disease is one with well known / accepted causes.....lots of good studies indicating the link to too much fat....the Japanese afetr WW2 was one of the more interesting ones as theie diet significantly changed, result their average height shot up, but they then had heart desease....
Sorry but I cant accept there is a link here, but even if there is, without it being commonly known its hard to lay the blame at anyone who has it...
NB Whole snapper in hot sichuean sauce...yum...
regards
I'm not aware that the cause of Alzheimer’s, the most common cause of dementia, is known. Would you please therefore share with us the sources of your information, and explain why and how the disease occurs? Since the cause is known, there must be all sorts of recommendations to follow to avoid getting it. Don’t keep them secret. Let us know what they are so we can avoid getting it.
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