One of the biggest fears for retirees is the prospect of ending life in a rest home, and seeing the family fortune eaten up by fees. While at any given time only around 5-7% of people over the age of 65 are living in residential care, statistics show that just under 40% of older people die in care.
To be eligible for subsidised residential care an assessment is done to demonstrate that you have high needs and cannot be cared for at home. Next your income and assets will be assessed to determine eligibility for a subsidy. If you have a partner who is not in care, the asset limit is currently either $124,379 not including your house and car or $227,125 including your house and car.
If you are a single person or have a partner in care, combined assets must be less than $227,125 currently. If you are not eligible for a subsidy, you may need to fund your care by renting or selling your home, or taking out a reverse mortgage or Residential Care Loan. A Residential Care Loan is funded by the Ministry of Health and is paid back when you die or within 12 months of your home being sold, whichever happens first. Not everyone is eligible for one.
The maximum contribution you will need to make for your care is around $1,000 a week for basic care, although this varies by geographic area. The average length of stay is somewhere between 72 and 85 weeks.
It is possible to arrange your affairs in such as way as to provide a limited amount of protection of your assets, however this needs to be done carefully with professional advice. As the number of people requiring residential care increases, no doubt asset protection will become more difficult.
Liz Koh is an Authorised Financial Adviser. The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free of charge by calling 0800 273 847. For free eBooks, go to www.moneymax.co.nz and www.moneymaxcoach.com