How do I protect my assets from nursing home in NZ?

Funding long-term residential care in New Zealand can be a significant financial concern for many seniors and their families. Without proper planning, assets accrued over a lifetime can be quickly depleted. This guide provides an authoritative overview of how to legally protect your assets from nursing home costs in NZ by understanding the financial means assessment and available tools.

Quick Summary

Protecting assets from rest home costs in New Zealand involves legally reducing your countable assets to qualify for the Residential Care Subsidy. This can be achieved through strategic, long-term financial planning, such as using family trusts, implementing controlled gifting programmes, or applying for an interest-free residential care loan if necessary.

Key Points

• Start Early: The most effective asset protection involves planning well in advance, ideally before residential care is an immediate possibility, due to the five-year look-back period for the Residential Care Subsidy.

• Consider a Family Trust: An irrevocable family trust is a primary tool for protecting assets from rest home costs by legally removing them from your ownership. This requires giving up control of the assets.

• Understand Gifting Rules: When transferring assets, you must stay within the specific annual gifting limits ($8,000 in the last 5 years) to avoid triggering 'deprived asset' penalties during a financial assessment.

• The Residential Care Loan: If your assets are primarily in your home and you don't qualify for a subsidy, the interest-free Residential Care Loan, secured by a caveat on your property, is a viable alternative to selling your house.

• Seek Professional Advice: The rules surrounding residential care subsidies and asset protection are complex. Consulting with an elder law specialist and a financial advisor is crucial to ensure your strategy is legally sound and effective.

• Regularly Review Your Plan: Your circumstances and the government's rules can change over time. It's important to regularly review and update your asset protection plan to ensure it remains compliant and continues to meet your needs.

Understanding New Zealand's Residential Care Subsidy

When a person requires long-term residential care in a rest home or hospital, Health New Zealand - Te Whatu Ora provides a Residential Care Subsidy to those who meet specific financial criteria. To qualify, you must undergo a financial means assessment conducted by Work and Income. This assessment looks at both your income and your assets.

The thresholds for assets are reviewed and adjusted annually. For those aged 65 or older, there are different limits depending on your situation as a couple. This assessment is the central consideration when looking at how to protect your assets from nursing home costs in NZ. Strategies for asset protection are primarily designed to reduce your countable assets below these government-set thresholds.

Asset Thresholds for 2025

As of July 1, 2025, the asset limits for those aged 65 or over are:

• Single person: A total asset limit of $291,825.
• Couple (both needing care): A combined total asset limit of $291,825.
• Couple (one partner needing care): Two options are available:
  • Combined assets of $159,810, excluding the value of the family home and car.
  • Combined assets of $291,825, including the value of the family home and car.

It is crucial to be aware of these figures and to stay updated, as they can change each year. The value of your assets includes savings, investments, bonus bonds, and certain life insurance policies. Household furniture, personal belongings, and one car (if your partner or dependent child lives in the home) are generally exempt.

Using a Family Trust for Asset Protection

A family trust has long been a popular tool in New Zealand for asset protection, including against rest home costs. A trust is a legal arrangement where you transfer ownership of your assets to a group of people (trustees) to manage for the benefit of others (beneficiaries). When done correctly, the assets are no longer considered yours for the purposes of the financial means assessment.

To be effective for this purpose, a trust must be irrevocable, meaning you give up legal control over the assets once they are transferred. A revocable trust, where you retain control, offers no protection because the assets would still be considered yours by Work and Income. Establishing a trust requires careful legal guidance and should be done well in advance of needing care, as there is a look-back period for financial assessments.

The Importance of Gifting Programmes

Following the abolishment of gift duty in 2011, many people began gifting large sums at once. However, the gifting rules for the Residential Care Subsidy were not abolished. Work and Income can treat gifts made within specific timeframes as 'deprived assets,' adding them back into your financial assessment. To avoid this, a controlled gifting programme is necessary.

Under current rules, you are permitted to gift up to $8,000 per year (for a couple or individual) within the five years leading up to your application without it being considered a deprived asset. For gifting completed more than five years ago, the annual limit rises to $27,000, which includes gifts made by a partner. A lawyer can help you structure a gifting programme to legally reduce the value of your estate over time. A common method is selling an asset to the trust at market value, leaving a debt, and then forgiving a portion of that debt annually within the gifting limits.

The Residential Care Loan Alternative

If you own your home and have other assets that push you over the subsidy threshold, a Residential Care Loan may be an option. This interest-free loan is available for those who need residential care but do not qualify for the full subsidy. The loan is paid directly to your rest home and is secured by a caveat over your home, which is essentially a legal notice on the property's title.

The loan is typically repaid after you pass away or when the house is eventually sold. This allows you to avoid having to sell your home immediately to fund your care. When your loan balance reduces your overall assets below the subsidy limit, you can then transfer to the Residential Care Subsidy.

Comparison of Asset Protection Strategies

Feature	Family Trust	Controlled Gifting	Residential Care Loan
Mechanism	Transfers assets to trustees for beneficiaries, removing them from your estate.	Reduces your estate's value over time by giving away assets within government-set limits.	Allows you to defer payment for care by securing an interest-free loan against your property.
Main Benefit	Long-term, robust protection against rest home costs and other creditor claims.	Can be used to reduce your estate and assist family members while working towards subsidy eligibility.	Avoids the immediate sale of your home to cover care costs.
Key Requirement	Must be irrevocable, set up well in advance of needing care, and involve proper legal transfer.	Must follow specific annual gifting limits ($8k in last 5 years) to avoid deprived asset rules.	Only available if you own property and don't qualify for the full subsidy.
Timing	Early, proactive planning is essential to clear the look-back period.	Can be done over time, with careful tracking of gifts.	Can be applied for closer to the time of care, but eligibility depends on assets.
Complexity	High. Requires legal and potentially accounting advice.	Medium. Need accurate records and legal documents for debt forgiveness.	Lower. Administered by Work and Income, but requires legal documents for the caveat.
Risks	Must give up control of assets. Poorly executed trusts can be challenged.	Excessive gifting can trigger deprived asset penalties.	Must be repaid, potentially from the sale of your house or estate.

The Crucial Role of Expert Advice

Navigating the complexities of asset protection and residential care funding in New Zealand is not something to do alone. Given the significant implications for your financial future and your family's inheritance, consulting professionals is vital.

• Elder Law Specialist: A lawyer specialising in elder law can provide tailored advice based on your specific circumstances. They can ensure your trust is established correctly and that any gifting is compliant with Work and Income's rules.
• Financial Advisor: A financial advisor can help assess your overall financial situation, including the potential impact of rest home costs, and ensure your asset protection strategy aligns with your wider retirement and investment plans.

For more detailed information on government support, including the Residential Care Subsidy and Loan, you can visit the official Work and Income website, the authoritative source for these matters: Work and Income.

Conclusion

While the prospect of paying for long-term residential care can be daunting, there are legitimate and effective ways to plan for and protect your assets in New Zealand. Early and strategic planning, whether through a family trust, a disciplined gifting programme, or by considering the residential care loan, can provide peace of mind. The key is to act proactively and seek expert legal and financial advice to ensure all steps are taken correctly and in compliance with the relevant legislation and subsidy rules. This proactive approach will empower you to secure your financial future and leave a lasting legacy for your family, rather than seeing your hard-earned assets spent on care fees.

Frequently Asked Questions

Does a revocable trust protect my assets from rest home costs in NZ?

No, a revocable living trust will not protect your assets from rest home costs. Because you retain full control and ownership of the assets within a revocable trust, Work and Income will still count them in your financial means assessment for the Residential Care Subsidy.

What is the five-year look-back period for the Residential Care Subsidy?

The five-year look-back period is the time frame during which Work and Income scrutinises your financial records for any asset transfers or gifts you have made. Gifts above the allowable limits during this period are considered 'deprived assets' and will be counted towards your total assets, potentially disqualifying you from the subsidy.

How much can I gift without affecting my Residential Care Subsidy eligibility?

Within the five years before applying for the subsidy, you can gift up to $8,000 per year in total (as an individual or a couple) without it being counted as a deprived asset. This limit can increase for gifting done more than five years prior to your application.

Will I have to sell my family home to pay for rest home care in NZ?

Not necessarily. If you exceed the asset threshold but the majority of your wealth is tied up in your home, you may be eligible for a Residential Care Loan. This interest-free loan allows you to use your home as security for your care costs, and it is usually repaid from your estate when your property is eventually sold.

What assets are considered exempt in the financial means assessment?

Certain assets are exempt from the assessment. This includes household furniture, personal belongings, and one car. For couples where one partner remains in the home, the family home itself can be excluded if they opt for the lower asset threshold.

Are there any tax implications for gifting assets in NZ?

New Zealand abolished gift duty in 2011, so there is no tax on the act of gifting itself. However, when gifting income-generating assets, the tax implications for the recipient should be considered. Furthermore, gifting still has significant consequences for your eligibility for the Residential Care Subsidy.

Can I use a trust to protect assets from a future partner's claims?

Yes, a family trust can be used to protect assets from future relationship property claims. However, this is a separate consideration from rest home costs. The timing and structure of the trust transfer are critical, and specific legal advice is essential to navigate the Property (Relationships) Act.

Who should I talk to for advice on protecting my assets?

For expert advice, it is highly recommended to consult a New Zealand elder law specialist and a financial advisor. They can provide guidance on structuring a family trust, managing a gifting programme, and understanding your eligibility for a Residential Care Subsidy or Loan.