Residential Care Subsidies and Trusts

Ministry of Social Development’s requirements for eligibility to a residential care subsidy are becoming more complex over time – and it is important to know how this may affect you, especially if you have a trust.  

Since many trusts were established, the requirements for eligibility for a Residential Care Subsidy (Subsidy) to contribute to the costs of rest home care have changed. The eligibility criteria continues to shift with the Ministry for Social Development (MSD) focusing increasingly on trusts and any gifts made to trusts by those applying. This can affect a range of clients but when farm life evolves into needing long-term residential care, understanding government subsidies – and how trusts and gifts may affect eligibility – is essential.

What is a subsidy?

A Residential Care Subsidy is a form of benefit provided by the government to cover part of the cost of rest home care or hospital level care for those who need it long term and cannot afford it.

This scheme is administered by the MSD, and the subsidy is paid directly to the care provider.

Who can receive the subsidy?

An applicant could qualify for a Residential Care Subsidy if they are:

• are aged either:
  • 65 or older;
  • 50-64 and single with no dependent children.
• are medically assessed as needing long-term residential care in a hospital or a rest home;
• need this care for an indefinite length of time;
• are receiving contracted care services.

How does MSD determine if you can afford care?

Whether an applicant can afford to pay for their care is determined by a financial means assessment by MSD, this is a two-stage test. MSD will consider your assets (stage one) and your income (stage two).

MSD will adjust the asset and income limits yearly based on inflation. The thresholds below are current from 1 July 2025.

Stage One – Asset Test

To satisfy this test, you must fall under either of the following asset limit thresholds:

• Threshold A: for single people or couples where both partners are in care, the higher limit of $291,825 will apply;
• For couples where one partner is in care, while the other remains in the family home:
  • Asset Threshold A: the higher threshold of $291,825 which would include all their assets (including the family home); or
  • Asset Threshold B: a lower threshold of $159,810 which excludes the value of the family home and any vehicle.

Examples of assets that are included in the assessment are cash, investments, loans made to other people (including to family trusts), and properties.

Stage Two – Income Test

If you pass the asset test, MSD will then check your income (such as NZ super, interest, payments to you from a Trust) to calculate how much you must pay towards your care.

What about Trusts, Gifting and Deprivation?

Gifting

MSD will allow limited gifting to family members or Trusts without it affecting your subsidy application:

• Within 5 years of the application: you can gift up to $8,000 per person per year.
• More than 5 years before the application: you can gift up to $27,000 per couple per year.

If you gift more than these limits (or have in the past), MSD may treat the extra amount as if you still own it. This is called deprivation, and it can affect whether you qualify for the subsidy.

Examples of deprivation can include:

• Giving away property or selling it for less than its worth.
• Loaning money without charging interest.
• Changing ownership of a property without a valid reason.

If MSD finds that deprivation has occurred, they can include this in your financial means assessment.

If you have gifted assets to a trust and deprivation has occurred, there is an expectation that the trust will contribute to your care. MSD can request that you ask the trustees for financial support. It is important to be aware that if the trustees refuse to pay for care, then MSD may decline granting the subsidy.

Recommendations

If you or a family member is planning to move into rest home care and there is a family trust involved, we recommend that you contact us to assist with the preparation of an application for the residential care subsidy, or a residential care loan and provide advice on your gifting and family trust moving forward.

A full review of the trust and your personal structure is important to understand how and when assets were transferred and whether any deprivation has occurred.

Want to know more?

If you have any questions about residential care subsidies and applications with trusts involved, please contact Sharon Knowles or our Property Client and Trusts Team.

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