Rest – Home Care Costs
As authorised financial advisers, one of the real concerns we hear from clients is the worry about potential rest home costs. People who qualify for rest home care will either need to pay a maximum contribution of about $800 per week for their stay or apply for the Government’s residential care subsidy. Regardless, unless they are prepared to pay more privately, they most likely will have a basic 12 square metre room. They will also need to share bathroom facilities.
There are three levels of facilities offering accommodation and care for retired people. These range from the almost resort like facilities offering independent living, to hospital care beds for those requiring 24 hour care.
The three main styles of facilities are retirement villages, rest or care homes, and aged hospital care. Retirement villages tend to be used by the able bodied who may have downsized from the old “family home”. These people usually buy a licenceto occupy. This can be costly, and there is an inevitable downside cost when the property is disposed of. They do in theory provide peace of mind.
Sometimes things go wrong for residents. An example is where a number of residents at the Mary Shapley apartments in Whakatane, have seen their outdoor feature of gardens, disappear as BUPA crams more development being more rooms onto an already high density site. They have also lost their peace and quiet for almost a year while the complex is a construction zone. Given that the average resident stay is possibly in the region of seven years, losing almost fifteen percent of the time that they were expecting to have quiet peaceful occupancy is a large price to pay for the residents.
The average age of a person going into a rest home is 84, with the average stay being three years. For those going into aged care hospital facilities it is one year. Remember these are averages. We had one of our own family members in hospital care for around seven years.
To qualify for the residential care subsidy you need to be aged over 65 and have assets valued at less than $210,000 as a general rule. Personal belongs such as clothing, jewellery, furniture, and household effects are not included. Thresholds are subject to change. While they have increased, they are pretty low if one partner is still living in the community.
People, who pass the asset test for the residential care subsidy, but have income, usually need to contribute to the cost of their care. NZ Super, Veterans Pensions, earnings from investments, business, family trusts can all be taken to pay for the care. The government can also take 50% of private superannuation payments and life insurance annuities.
For people who do not qualify for the subsidy, but have limited assets to pay rest home fees, the Ministry of Health can provide an interest free loan against the person’s home. The loan stops if you subsequently become eligible for the subsidy. It is repayable when you sell your home or twelve months after your death whichever occurs first.
In conclusion the transition to care for the elderly is an expensive process. People need to make their choices of what sort of care that they would like. You need to be aware that just because you may initially move into a retirement village, you may not be able to secure a bed in the village hospital wing if your health deteriorates to the stage that you need hospital care. Another thing that you need to be aware of is that the IRD and Work and Income have different ways of assessing income and assets. This can prove very frustrating.
Steven Barton (FSP 32663) and Susan Pascoe Barton (FSP 32382) are Whakatane based Certified Financial Planners and Authorised Financial Advisers. Their initial disclosure statements are available free of charge by contacting them on (07) 3060080 or they can be downloaded from www.pascoebarton.co.nz. This column is general in nature and should not be regarded as personalised investment advice.
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