If you ever need to pay for long-term residential care in a hospital or rest home and are 65 years or older, then you can get a subsidy from the government.
If you are single or already have a partner in residential care, then your combined assets must be $227,125 or less.
If you have a partner that is not in residential care, then your combined assets must be either $124,379 plus your home & car or $227,125 including your house & car. The house is only exempt where it is the residence of the partner that is not in care.
The assets that are counted include cash, shares, insurance policies, loans (including loans to family trusts), investment properties, boats, vehicles and your house.
If you are eligible for the government subsidy, then that subsidy is paid directly to the hospital or rest home. The amount of the subsidy is the cost of the care less your income contribution from your NZ superannuation, your income from investments and your trust beneficiary distributions.
So, should you transfer your house into a trust and gift that at $27,000 per year so that you’re eligible for the subsidy if you ever go into aged care?
If you are single
As your combined assets must be $227,125 or less, chances are that the equity in your home will be far more than that so you won’t qualify for the subsidy if you own that house under your personal name. If your home is worth say $1m with no loans, then it will take 29 years to gift enough of that equity to a trust to get under that asset threshold. So, you’d need to get the gifting process going from the age of about 30 to be on the safe side!
If you have a partner
If both of you end up going into aged care, then you’re in the same situation as the example above.
If only one of you ends up going into aged care, then your assets can only be your home plus $124,379 of other assets. So, in that instance it may actually be better if the home was under your personal name.
Disclaimer: The above article is general in nature and we recommend you seek professional advice tailored to your specific personal situation.