Residential Care Subsidy testing found to be too harsh…

The Court of Appeal has recently upheld a decision of the High Court on income and asset testing for Residential Care Subsidies. 

The decision shows that the Ministry of Social Development has applied an aggressive interpretation of the law when assessing wealth and income using the “means test”. 

The means test is a calculation method used by the Ministry to determine whether an applicant is over the threshold for assets and income.  If they are considered over the threshold they will not be entitled to additional rest home care subsidies.  These additional subsidies may be required in instances where the person in care requires fulltime care, as such care can be very expensive. 

The elderly applicant’s family in the case had seen flaws in the calculation methods used by the Ministry with respect to their mother’s failed application for additional rest home care subsidies, and had spent the last five years in a legal battle with the Ministry. 

The Court concluded that the Ministry should not have included assets owned in a family trust when assessing the wealth and income of the elderly applicant in her application for additional rest home care.  

By including property held in family trusts the Ministry found that the elderly applicant was above the means test threshold and therefore was unsuccessful in her application.  This conclusion was irrespective of the fact that she and her late husband had sold their family home and their bach to their family trusts at a reasonable market price in the 1980s and 1990s.

Following the sales of the properties to the trusts the applicant and her husband had completed a gifting programme in accordance with the gifting rules ($27,000 total every year, except for the five years prior to the residential care subsidy application) and had since completely forgiven the debt owed to them by the family trust.  The Ministry had considered this to be “depriving” themselves of the income from their assets.

The Court found that because the properties had been sold at a reasonable market value and the purchase price had been gifted at the appropriate rate, the properties were assets of the trusts, and the only aspect of income deprivation that could be examined by the Ministry personal to the elderly applicant was the interest that should have been charged by the applicant and her husband on the principal amount advanced to the trusts.  

The Court of Appeal stated that the focus of the legislation governing rest home subsidies is to alleviate hardship, designed for those who cannot afford to pay for the care they require.  The Court stressed that applicants should be looking to any private “resources available to them” to meet the costs of their care. 

We are yet to see whether the many previous applicants who have been denied additional rest home subsidies for similar reasons will be compensated by the Ministry in accordance with this decision.   

Rest home subsidies are a complex area, so it pays to take legal advice if you or your loved one are looking at going into care, to see if you may be eligible for a subsidy.