Q&As
Help for the helpers
QI’d appreciate your help with a recent distressing situation where a close friend required assessment for respite care and, subsequently, a long-term care bed. It was impossible to find somewhere locally and a bed had to be found in a neighbouring town at some distance from friends and family.
As a pensioner living alone, I have considered caring for my friend in my home. However, I am unsure how this arrangement will affect my pension. Specifically, I would like to know if I will receive any assistance from support services or if there is a provision for a pension top-up to cover the additional costs incurred by caring for my friend.
Furthermore, I am concerned about being assessed as a couple for subsidised care in the future. Will my assets be taken into account for the subsidy if I choose to provide home care for my friend and they finally need a care bed? Understanding these implications is crucial for making an informed decision that ensures my friend’s well-being without jeopardizing my financial stability.
AGood on you for considering taking in your friend. You ask some wise questions, and most of the answers are pretty good news.
Firstly, if your friend moves in with you, how might it affect your NZ Super?
“Super is not means tested, so any income she would receive would not affect her pension,” says Vice Saletele of the Ministry of Social Development.
“However, if the friend stays with her for more than 13 weeks in a 26-week period, she will receive a single sharing accommodation rate.” The fortnightly payment would drop from $1,213.34 to $1,111.62 before tax — about $50 less a week.
But presumably if your friend was living with you, she would contribute her NZ Super payments, considerably boosting your household income.
I also asked Saletele about whether your assets would be taken into account if your friend lives with you and then moves into long-term care.
The reply: “The reader states this is a friendship. On that basis, that she is not in a de facto relationship, none of her assets would be assessed for her friend’s subsidised care in the future.” There’s more information on how relationships are defined at tinyurl.com/RelationshipNZ
What about whether you might receive financial support for caring for your friend? Health NZ (Te Whatu Ora) answered that.
“Two of the options for supporting older people to remain at home under the care of their whānau and family are Paid Whānau and Family Care and the Carer Support Subsidy,” says a spokesperson.
“Both of these options are accessed by having a needs assessment from a Health NZ Needs Assessment Service Coordination (NASC) service. A GP or specialist may also be able to support you to access these options. There is no asset-testing in relation to accessing these two options.
“After a needs assessment is carried out, the person receiving care can choose to have a whānau or family member, or an external carer provide this care. The carer can then be employed by a Home and Community Support Service provider to deliver the agreed services.”
If you care for your friend in your home, could you qualify as an external carer, I asked.
Simone Newsham of NASC replied: “Yes, if your friend identifies that she would like a person to provide the identified support needs, and that person is willing and able to be employed by a contracted Home and Community Support Services provider, then they can be paid for the provision of the support that the NASC has identified as required.”
For more info on all this, go to this page and this page.
After reading that material, I had one more question: “The Home Support page refers to services in your own home. Would the services also be available to someone who moves into a friend’s home?
“Absolutely,” said Newsham. “The Home and Community Support Service can be delivered to wherever the person resides, whether it is permanent or temporary, the support will follow the person.”
Check out the links above for next steps to take. I hope it works out well.
Gold tax not recent
QGood to see your comment about gold in the Herald last week. I would like you to evaluate the statement from the Inland Revenue, that said gains on the sale of gold are taxable.
Years ago the rule was that an increase/decrease of gold was not to be declared as income/ loss! How can such an important change be implemented without an exemption to already established trades?
And what if gold was not bought but given or inherited — and no buying with the intention of selling was involved. I think this is an arrogant, unlawful change of rules. I would like to have an answer to this point.
ATax expert Terry Baucher of Baucher Consulting says it’s not correct that the rules on this have changed. “The general rule has always been as the Inland Revenue person said, “what was the dominant purpose at the time of acquisition?” So bullion would have been taxable in the 1990s under this principle if there was a dominant purpose of disposal. There has been no change in approach.” Last week’s correspondent had bought his gold in the 1990s.
Baucher adds, “However, there was little practical guidance on this position in relation to bullion until 2017. This was noteworthy for quoting one of my favourite tax cases, Wisdom vs Chamberlain, involving the English comic Norman Wisdom. Contrary to his bumbling on-screen persona Wisdom was a very astute investor who in 1962 bought silver bullion as a hedge against a devaluation of the pound. He realised a substantial gain which he argued was capital (this was before the UK introduced CGT in 1965), but HM Inspector of Taxes argued it was a revenue gain and won when the case went to court.”
Your question about inheritances is a good one, says Baucher. “Again, it depends on the purpose of the person who inherited. Note that the base price would be that at the time of inheritance.”
Baucher notes that this whole situation is “another example of why a CGT would actually simplify matters, because it removes the question of intent.”. Good point. The current NZ law on this is, in my opinion, ridiculous.
A shift to the rich?
QI’ve followed you for years. Good solid commentary. But of late there has been a shift into those ultra-privileged among us frequenting your column, with little regard for those less fortunate. Last week someone with $8.5 million in assets was asking if they can retire.
Among my peers at 67 years old, and after a lifetime working, most are extremely fortunate to have a modest house paid off. Money in the bank is rare and a large asset base unheard of. And we are the fortunate.
I would humbly suggest the showing off of wealth under the guise of needing advice is not worthy of your time. I know the subscriber Herald model is targetting the rich, but spare a thought for the retirees after a lifetime cleaning the hospitals, still renting and struggling.
AI would be really surprised if this column has shifted that way. I’ve always received more letters from the well off than from people struggling, but I’ve run a much bigger proportion of the latter’s questions. And that will continue.
I chose last week’s letter because many people wonder if they can afford to retire, regardless of their wealth. I wanted to point out the rule of thumb — that for every $100,000 of savings you can spend $100 a week in retirement — to everyone. The fact that the correspondent’s situation intrigued or angered many people probably boosted readership, getting the useful rule out to more people.
On the Herald targeting the rich, nobody told me that! But I’m sure the Herald is happy to have subscribers at every income level.
‘Most stupid question’
QThe Q&A about the man with $8.5 million must be the most stupid question I have ever seen in your column. I think it is someone taking a rise out of you, and am surprised you would even comment on such nonsense.
If this individual is clever enough to make this much money and assets, surely they can work out a retirement plan for themselves. Let’s stick to common sense questions and continue to enjoy your column.
AI explained above why I ran that letter. On whether a wealthy person is able to work out their own retirement situation, that’s not necessarily true.
For all you and I know, that man and his wife may have inherited most of their wealth from their parents or other relatives. These days, with many people dying with houses worth well over $1 or $2 million, it’s not uncommon for financially unsophisticated people to find themselves extraordinarily well off.
In other situations, some people make big money from a great business idea and a large dose of luck. Or they are successful in the arts. Or they win Lotto. There are many ways to acquire wealth without acquiring investment knowledge.
Ease into retirement
QThe column last week started with the 72-year-old worried if he has enough for retirement. I have read somewhere that “if you are good at something, maybe just do a little less”. This is to save someone from “retiring” and then purchasing a cafe or something they know nothing about and losing it all.
Maybe you could suggest he goes down to three days a week as “someone who is nervous about losing his salary”. This would be a good first step to adjusting towards full retirement and living off less income and some investment income.
Working less will be agreeable for him and probably put the enjoyment back into his work for a couple more years.
AGood to see someone zeroing in on a different aspect of that Q&A. And I agree that it sounds as if the correspondent might miss work if he retires completely. So yes, if he’s able to cut back on his workload, that would work well.
It’s been a while since I received so many letters about a Q&A as I have about this one. I’ll run more of them next week.
Getting into hot water
QLast week you quoted Victoria University lecturer Jonathan Barrett writing about the heirs of home-owning baby boomers receiving “a currently untaxed bonanza.”
Barrett may well be incensed by what he calls an “unprecedented transfer of wealth” from boomers, but why should boomers not transfer what is left of their so-called wealth to whoever they want? A typical early baby boomer will have worked from the age of 16, possibly studied in their own time, stayed married to the same person from their early twenties, held down full-time jobs all of their lives and lived quite frugally in order to have the security of a “nest egg”.
From this nest egg they will pay all their expenses (without any additional support over and above superannuation) including expensive care as they age. They have not spent money on frivolous things and still probably always have the tap mixer on cold so as to not draw hot water when they turn the tap on.
If people who work hard all their lives are to be stripped of what they have put aside, then why would they bother to save? Isn’t an unintended consequence the likelihood that people will depend more and more on the State and just spend everything as they go?
ARelax. Even if boomers have, indeed, worked harder than other generations — which is highly debatable — they would still keep all their wealth under Barrett’s proposal. It’s just their heirs who would give up some money, which might then be used to help people not fortunate enough to receive inheritances.
What’s more, most heirs would keep most of the money — although the tax might be progressive, so that a bigger proportion of large estates would be taxed.
Either way, people with savings and their heirs would still be much better off than those without savings. There would be no disincentive to save.
As another reader, a supporter of an estate tax, says, “there seems little reason why those who have not earned the inheritance should not pay a tax based upon the value of the inheritance received.”
P.S. The government does support some people’s care when they age, and gives older people accommodation supplements and other assistance.
P.P.S. Please shout yourself hot water to wash your hands in winter!
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Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.