Residential Care Subsidy - The importance of undertaking a review.

When an elderly person enters a rest home, more times than not an application for a residential care subsidy will be required to be made with Work & Income.  The subsidy amount is the difference between how much a person must contribute to the cost of their care and how much the care costs.

To receive a residential care subsidy, a financial needs assessment is carried out by Work & Income.  To be eligible, that assessment must show that the applicant has assets and income equal to or less than the current applicable thresholds.  As at 1 April 2023 those asset thresholds are:

·         $256,554 – this asset limit applies to both individuals and couples.

·         $140,495 – if the family home and car are excluded.  For a couple where one person is moving into long-term residential care and the other is not, they can choose whether or not to include the value of their family home and car in this equation.

Recently we have come across two clients who, when going into residential care had applied for a subsidy but were initially declined after the financial means assessment was undertaken because their assets exceeded the allowable threshold.  After a short time paying for the full cost of care, their assets fell below the threshold.

The onus is on an applicant to notify Work & Income if their circumstances change.  Work & Income will not review the financial means assessment unless asked to do so.  For example, resources can be used up in paying for care which means later on the applicant would in fact qualify for a subsidy.  This has become more prevalent where couples have made gifts into a family trust and excess gifting has been counted back by Work & Income as an asset of the couple.  A historic gift cannot be cancelled, but the value of the excess gift as an asset can be reduced if the family trust is required to make payments to the rest home to cover the donor’s care.

If the application to Work & Income is handled by the applicant’s Power of Attorney, it is very important that the Attorney makes sure they regularly review the donor’s financial circumstances and make an application to Work & Income to review the financial means assessment if they think the applicant’s circumstances have changed to the point where they may have become eligible.

We have recently come across two situations where clients had become eligible to receive a subsidy some months after the initial financial means assessment, but a review was never undertaken.  This resulted in the applicant having to pay the full cost of care when they would otherwise have been eligible to receive a subsidy.  Overpayments in these circumstances cannot be recouped.

If you are acting as an Attorney for somebody who is going into residential care, you have an obligation to undertake regular reviews of the donor’s finances and ensure that an application to re-assess financial means is requested in a timely manner if you think that the donor’s financial circumstances have changed.

Cheryl Officer