Bad time to ask this.. how to protect a family home after retirement

Forums › Off topic › Bad time to ask this.. how to protect a family home after retirement

gbwelly

1243 posts

Uber Geek

#208974 7-Mar-2017 12:50

Given the retirement age has just gone up, there is a danger this thread will rapidly go off track but here goes.

I have a 66 yo family member who has expressed concern to me that if anything should happen to her and she gets stuck in a rest home that she'd lose her house and not be able to pass it on to her grandchild as she intends.

I realise that this is a specialised area of law, but I also know there are some very competent lawyers and laypersons on geekzone. So what I'm after is advice as to who to see and what to ask for to get the ball rolling to set something up to protect this (one and only) asset of hers.

Please, no comments about whether this is ripping the taxpayer off, denying future generations (pretty much the opposite IMO) or 'Can't help you, go see a lawyer' etc

Cheers!

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589 posts

Ultimate Geek
Inactive user

#1732463 7-Mar-2017 13:02

https://www.sorted.org.nz/guides/family-trusts

geocom

594 posts

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#1732470 7-Mar-2017 13:21

Age of retirement has not gone up. It is on the cards if national win the next election and won't come into effect until 2037 so yea it has not and won't depending on the next 6 governments as any of these can over turn this.

As for your question it would depend on how she owns the property. Seeing a lawyer is your only option unless your willing to give the internet much more information about the case.

No one is going to force someone into a retirement home without any consultation with the family and the person in question. This sort of thing does not happen overnight.

There is also a guaranteed amount you can retain when you have a home and qualify for a rest home subsidy. It is on the WINZ web site under rest home subsidies and qualifications. The amount you can have saved for the family goes up each year. It is currently about $240k https://www.workandincome.govt.nz/products/a-z-benefits/residential-care-subsidy.html

Geoff E

gbwelly

1243 posts

Uber Geek

#1732477 7-Mar-2017 13:30

Thank you solutionz and geocom. Once I found out the words Residential Care Subsidy, I found what I needed. Basically even if she put it into a trust in one go, the figure gifted would be so large she wouldn't even be protected by the 5 year claw-back period. Gifting it at less than 27K pa to fit under the clawback period she wouldn't be able to get it over the line in time. So she needs to keep her marbles then keel over suddenly when she finishes up.

Any other less known loop holes out there?

Wheelbarrow01

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Chorus

#1732550 7-Mar-2017 14:54

At this late stage there are probably few options, but it would pay to get legal advice as I am certainly no expert.

From a personal angle, in 2011 my mother's health finally deteriorated to the extent that she required full time rest home nursing care. She was forward thinking enough to have accumulated a couple of humble (circa RV $150,000) rental properties as well as the family home (all in Chch). She sold one rental property which helped pay for her $1200/week hospital room in the rest home. The remaining rental property, along with the family home, continued to be rented out to subsidise her care costs and slow the loss of capital.

She died in 2014, before the sale proceeds of that property had been exhausted, so she was able to leave a reasonable nest egg to us all.

Aged care costs, and costs plenty. If you have not made provision for it, unfortunately it will suck the family coffers dry. Of course, from that point on the care is paid by the tax payer, but there is nothing left for the next generation.

The 2 choices are to accumulate nothing, then let the tax payer fund your aged care. Or accumulate plenty, and use the income from it to pay for your care so you can leave a legacy. Unfortunately, if the only asset you have when entering aged care is the family home, it is likely to be swallowed up paying for your care over time. Unless you can command $1000+ rent from it per week of course.

Just my 2 cents worth.

PaulBags

809 posts

Ultimate Geek
Inactive user

#1732559 7-Mar-2017 15:07

I'm an only child & my dad died recently. My mum intends to put the house in my name as well so survivorship applies, I have zero idea if this is a good stratagy (or even possible). I do live in the house and rents being what they are can't afford to leave, I'd hope that would count in our favor. Sadly, "earn bundles of money" isn't likely to happen for us so as far as I can tell we don't don't have any other options anyway.

mattwnz

20141 posts

Uber Geek

#1732583 7-Mar-2017 15:19

PaulBags: I'm an only child & my dad died recently. My mum intends to put the house in my name as well so survivorship applies, I have zero idea if this is a good stratagy (or even possible). I do live in the house and rents being what they are can't afford to leave, I'd hope that would count in our favor. Sadly, "earn bundles of money" isn't likely to happen for us so as far as I can tell we don't don't have any other options anyway.

I would seriously suggest talking to a professional about that situation.

afe66

3181 posts

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Lifetime subscriber

#1732615 7-Mar-2017 16:04

Wheelbarrow01:
The 2 choices are to accumulate nothing, then let the tax payer fund your aged care. Or accumulate plenty, and use the income from it to pay for your care so you can leave a legacy. .

But if you accumulate plenty you just put into family trust and pay nothing!!

And then hand it to the next generation creating who also won't pay for their rest home care in time. But they will get student allowances because they are income " poor".

A.

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Brumfondl

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#1732634 7-Mar-2017 16:41

Guess I am the only one who say the title and thought "auto-cannons or tesla coils"...

Wheelbarrow01

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Chorus

#1732799 7-Mar-2017 23:20

afe66:
Wheelbarrow01:

The 2 choices are to accumulate nothing, then let the tax payer fund your aged care. Or accumulate plenty, and use the income from it to pay for your care so you can leave a legacy. .

But if you accumulate plenty you just put into family trust and pay nothing!!

And then hand it to the next generation creating who also won't pay for their rest home care in time. But they will get student allowances because they are income " poor".

A.

I don't necessarily agree with your first statement. Planning from the outset is key. You can't just put an already personally owned property into a family trust - at least not all in one hit, even though gift duty has been abolished. In order to remain eligible for the residential care subsidy, a person or couple can only gift a maximum of $27,000 combined per annum (not each), and in the five years immediately preceding the subsidy application, only up to $6,000 per annum in gifts to anyone of any kind are allowed.

If we consider a $500,000 house as an example, it's going to take 22 years to gift it to a trust and still remain eligible for the care subsidy. Don't ask me how the current soaring house values affect this - I can't even begin to work that part out. (if that $500,000 house doubles in value over that 22 years, will it take a further 22 years to gift the increase in value???)

People who thought the Gift Duty rules and care subsidy rules were the same have found out the hard way in the last few years. This article sums it up in just a few paragraphs.

I guess, strictly speaking, someone who arranges the purchase of a house in a trust will effectively accumulate nothing themselves (they will never own it), so my original statement is technically still correct....

lxsw20

3552 posts

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#1732801 7-Mar-2017 23:38

As I understand, laws around trusts have changes a lot in the last 5 years, my parents were told it is not worth putting their home in a family trust at this stage (they are 58/64). So it's worth speaking to a lawyer who properly understands trust law about what is best.

Wheelbarrow01

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Chorus

#1732802 7-Mar-2017 23:40

In my previous post, I believe I may have actually answered the OP's original question. Your relative can only gift $27,000 of the house's value to a family trust each year, and just $6,000 in each of the 5 years immediately prior to applying for the residential care subsidy.

Given that your relative is now 66, and assuming the property is worth at least a few hundred thousand dollars, it's most likely too late to take these steps. The best bet may be to rent the property out when the time comes, and use that money combined with any superannuation entitlements to pay for the required care. However if there is a shortfall, there may be no other option but to sell the property, the proceeds of which would then be used for care until exhausted (or the death of the person).

Having said that, there is an asset allowance. A single person can currently retain total assets of up to $219,000 and still be eligible for the subsidy. Again, how rising house prices affect this I am not sure.

For more comprehensive information, I'd start at this page on the WINZ website. I am certainly no expert so don't rely on anything I have stated

lxsw20

3552 posts

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#1732803 7-Mar-2017 23:43

^ Be careful, they may not be up to date information, as I said there seems to be a lot of changes going on around this. I have to sign my parents will before the 15th for example, as the law around wills is changing after that apparently.

gbwelly

1243 posts

Uber Geek

#1732825 8-Mar-2017 07:31

Thank you all for your information, especially Wheelbarrow01.

JimmyH

2886 posts

Uber Geek

#1733212 8-Mar-2017 18:46

While people here will have views, and personal experiences, for something this major and complex you need to talk to a lawyer who specialises in this area. It's well worth paying for an hour of their time to do so. Don't rely on bush lawyers and information that may be outdated or wrong. Otherwise, it can come horribly unglued. At best, you could fail to protect the asset when you might have been able to do do. At worst, you could wind up being sued for trying to defraud the taxpayer.

Consult a lawyer! (and the sooner the better)

mailmarshall

349 posts

Ultimate Geek

#1733414 9-Mar-2017 05:55

lxsw20:
^ Be careful, they may not be up to date information, as I said there seems to be a lot of changes going on around this. I have to sign my parents will before the 15th for example, as the law around wills is changing after that apparently.

Does anyone know what is changing on the 15th?

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