What happens if you don't qualify for a residential care subsidy? Residential care loan agreements in a nutshell

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Residential Care Loan LawyerRest home or residential care is expensive and no one at this time of life should be worried about money.  You may qualify for a residential care subsidy but what happens if you don’t and all your money is tied up in your home?

Where you are assessed by the Ministry of Health as needing rest home care, own your own home and have limited other assets (up to $15,000 per person), the Ministry of Health offers an interest free residential care loan.  In a nutshell:

  • The residential care loan is arranged through Work and Income’s Residential Subsidy Unit (0800 999 727).  
  • The residential care loan documents are prepared and sent out directly to your nominated lawyer.  Your lawyer will check the documents and meet with you to explain them to you and advise you on your particular circumstances.  
  • The documents must be signed by you in front of your lawyer.  Someone who has Power of Attorney over your property affairs can sign on your behalf. This highlights the importance of giving a Power of Attorney to someone you trust while you are able to do so.  
  • Your lawyer will also search the certificate of title to the property, and check and certify to the Ministry that rates are up to date and that the Ministry of Health is listed as an interested party on the property insurance policy.  
  • Once your lawyer sends the signed documents back to the Ministry they will process the loan and lodge a caveat against the title to the property. The property can still be sold but the caveat protects the Government’s right to be repaid.
  • The Government pays any benefit or superannuation payments directly to the rest home (less a sum as a personal allowance) along with the balance of the rest home fees due.  This balance becomes the debt against the property, which increases each time a payment is made.
  • If you start to receive a residential care subsidy then the loan will stop and the debt will sit at the amount owing at that date.
  • The debt must be repaid when the property is sold or 6 months after your death, whichever is the sooner.
  • Interest is not charged on the loan but penalty interest may be charged if the debt is not repaid when it is due (see above). 

This simple process can take the pressure away from you and your family to sell the property immediately and allow other family members to continue to live in the home. 

See the WINZ website (www.workandincome.govt.nz) for details or contact 0800 999 727.  To talk to our elder law specialist, Carolyn Ranson about the residential care loan or any other elder law matters, phone her on 09 837 6891 or carolyn.ranson@smithpartners.co.nz