Retirement - Can You Protect Your Assets Against Means Testing?

The answer is frequently "yes", but often not in the way that many people think.

You will recall that trusts used to be popular to protect assets against means testing when moving into retirement care. However, this is no longer the case.

If you have an interest in a trust, you are now generally worse off from a means testing perspective. This is because an individual person or couple is entitled to fixed amounts that are exempt from means testing (e.g. up to $219,889 including the home and car for a couple), but this exemption does not apply if the assets are held in a trust.

If you have an interest in a trust, the Ministry of Health expects that the trustees will look after you. They ignore any assets that you have transferred to a trust when they review your assets, with no timeline on the date that you transferred assets.

If you are approaching retirement and have either set up or are involved in a trust, we recommend that you consider whether the trust is going to create problems for you.

So, given that trusts are no longer effective against means testing, effective planning may well require a different approach. Turner Hopkins can assist you, and you may find that an additional 30-40% of a couple's combined property value can be kept in a safe harbour against asset testing.

With the average Auckland house price now over $1,000,000, effective planning could translate into a $300,000 - $400,000 inheritance for your children over and above the amount that is exempt from means testing. If the value of your properties is more, the benefits can be significant.

For a no-frills practical review of your estate planning, please contact us...

Published: Sun, Nov 27th, 2016

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