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Family Trusts and Rest Home Fees

01st June 2009
By Paul Easton in Trusts
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Bruce and Julie had worked all their lives to build up their assets. They'd paid their taxes and tried to contribute to society. Bruce frequently helped his neighbours out doing odd jobs for them and Julie worked as a volunteer for the Blind Institute. They'd based their life on a simple philosophy - look after family and friends and help our where you can.

During their lives they'd done pretty well for themselves considering where they'd started from, which was ground zero. They had a nice house and were feeling comfortable with their lot. They'd been blessed with two children and now they even had grandchildren which they loved dearly.

Setting up a family trust is something they never considered because they didn't understand how it might remove risk

At the age of 60, tragedy struck. Julie had a heart attack and died. The family rallied around and helped Bruce as much as they could. Two years later the family suffered another blow - Bruce got diagnosed with Alzheimer's disease.

It was awful for everyone to watch as slowly Bruce forgot who they were. Eventually, the family had no choice but to put Bruce in a rest-home where he could get the care and support he needed 24 hours a day. Trouble was, rest home care was expensive - really expensive. $850 per week was what the rest home wanted and that didn't include any extras such as taking Bruce out for day trips.

The family approached the Ministry of Social Development and requested a residential care subsidy be granted to Bruce. The Ministry told them that before Bruce was eligible for a subsidy, he had to use his own assets as they only granted subsidies to people who had less than $180,000 worth of assets.

This threshold of assets was a real problem. Bruce owned the house he had been living in and it was worth around $310,000. After much discussion, things were worked out. The subsidy would be granted the Ministry said. The downside to the solution was the subsidy would be treated like a loan. So when Bruce finally died, the house would be sold and the loan would have to be repaid back to the Ministry.

Bruce lived for another 6 years in the rest home. The total amount of his rest home care came to $265,200. By the time real estate agents fees were paid and the loan was paid back to the Ministry there wasn't much left. - only around $35,000.

The sad part about this story is that Bruce and Julie would have wanted the house to have gone to their children. They'd worked hard to create a life and leave their children an inheritance and that had all been lost to the Government.

What could have been done to protect the children's inheritances?

Well, taking some sound professional asset planning advice wouldn't have gone astray. Putting the home into a Trust before Bruce needed care would have definitely have helped.

Anyone wanting to protect their assets and the inheritances they want to leave their children should take steps to implement an asset protection programme.
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