Maximise retirement entitlements

OPINION: During the next 18 years the number of people who are 65 in this country will double, writes Warwick Campbell in this week's Work to Rule.

This is going to have a significant impact on the way New Zealand operates.

As you look towards your retirement years there are a few easy things that you can do to try to maximise your entitlements from Work and Income New Zealand.

Many government-provided benefits or subsidies are calculated based on your assets and income. Before reaching an age where you might need extra support you can consider reducing your personal assets and income by doing one or more of the following:1. Transferring your significant assets (house, holiday home, investments) to a family trust; or2. Transferring joint assets to "tenants in common" and completing a life interest in your will to your partner; 3. Creating a funeral fees trust; and/or4. Creating an estate fees trust.

You may not be familiar with the funeral fees trust and estate fees trust.

The Social Security Act 1964 (Part 4) sets out the laws applicable to rest home subsidies.

This legislation provides that pre-paid funerals or trusts to pay funeral fees of no more than $10,000 per person are an exempt asset for the purposes of a rest home subsidy asset test.

This means you can put up to $10,000 aside to cover the costs of your funeral and that will be not be considered to be your personal asset for this test.

To qualify, the funds must be unavailable for any other purpose.

Any excess funds, once the funeral is paid for, can be returned to the estate of that person but the person themselves must not be able to access the funds during their lifetime.

The estate fees trust is similar to the funeral trust but its purpose is to pay the legal fees for estate administration.

These trusts are an effective tool in reducing your assets.Many people make the mistake of waiting until they or their loved one is going in to rest home or hospital care before putting in place a plan that may help them qualify for a rest home subsidy. Often this is too late and there is limited ability to reduce assets.

The sooner you start a plan, the greater the opportunity you may have to maximise any entitlement from the government.

» Warwick Campbell is a partner at Preston Russell Law. E-mail questions to Warwick.Campbell@prlaw.co.nz.

- © Fairfax NZ News

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