NZ Herald 8 August 2020

AI would rate it 10, as it’s already happened! This has nothing to do with changes to trust law taking place early next year. This change has been in effect for quite some time.

“In assessing eligibility for a residential care subsidy, the Ministry of Social Development will take into account deprivations of assets, which includes the transfer of property into trusts, whether by gift, or sale for less than true market value,” says trust and estates lawyer Rhonda Powell.

“There are limits on the amounts any individual or couple can gift during a 12-month period, and above those limits, the Ministry of Social Development will add the amount of the gifts into the asset pool for the purposes of conducting the means assessment.”

In other words, if your gifts into your trust were above the limits, MSD will treat the extra assets as still belonging to you. There’s more on the limits here.

Powell adds, “The Ministry of Social Development has very broad powers to look into historical gifting.”

I understand this is because it was deemed unfair for people to look poorer than they really are so the taxpayer helps to pay for their care.

I know many people were encouraged to set up a trust like yours years ago. But I have to say I agree with the government’s approach now.

I’ve never forgotten a letter from a rest home resident, some time ago now, saying she was motoring through her savings to pay for her care while the woman in the next room was skiting about having several million dollars in a trust while her care was on the government.

That’s not to say all trusts are a problem. “There are still good reasons to consider a trust, for instance as a mechanism of succession planning, or as a way of protecting family wealth against various sorts of liabilities,” says Powell. “However, avoiding rest home fees is not one of them.”

AThanks for introducing some class into the column!

You’re referring to comments in last week’s column about problems that can arise from treating children unequally in a will.

For other readers — including me when I first read your letter — a testator is someone who writes a will.

And for anyone struggling to understand Shakespeare’s language, Sparknotes.com says your quote means: “If you pay everyone what they deserve, would anyone ever escape a whipping? Treat them with honor and dignity. The less they deserve, the more your generosity is worth.”

It’s a thought-provoking idea, and so is your point about how none of us really knows everything about anyone else’s life.

Still, as lawyer Rhonda Powell said last week, there are some good reasons for unequal inheritances. “Some children may have received additional support during their parents’ lives, and some children may have higher needs than others.”

Another reason may be that one child has helped their parents in old age much more than the others did.

But, as Powell said, it’s better if all this is discussed while the parents are alive, rather than having family rifts and perhaps litigation after the parents die.

Your letter got me thinking about whether this was the first time Shakespeare made it into this column. But no.

In April 2017 a superannuitant objected to being referred to as a beneficiary. In my reply I said names don’t really matter. “As Shakespeare might have said, a superannuitant by any other name is still pretty lucky.” That was based, of course, on Juliet’s declaration to Romeo that “a rose by any other name would smell as sweet.”

And back in March 2004, in a Q&A about the possibility that superb share investor Warren Buffett has just been lucky, I said, “They say that if you get enough monkeys typing, one of them will come up with ‘Hamlet’.”

But it’s about time the Bard paid us another visit!

AGosh! Many readers will envy you, having a cool million just sitting around. Some might even be annoyed that you can be so casual about money, when they’ve had to work hard for every penny of savings, and then worried about how to invest it.

But — as the correspondent above points out — we don’t know your story. You’re entitled to feel whatever way you want to about your wealth.

The answers to your questions are yes and yes. As someone over 65 you can treat your KiwiSaver account basically like an ordinary bank account — although withdrawals might take a few days.

One note of caution: aggressive KiwiSaver funds are the highest-risk ones. While they tend to grow fastest over the long term, they can plunge, as you saw recently. And they might not recover nearly as fast next time.

Be prepared to see your balance halve and take a few years to come back. If that sounds alarming, move down to a lower-risk fund with at least some of your savings.

AI’m sure the situation is not as bad as you fear.

Every few years, Treasury produces a long-term fiscal statement. It covers how the experts expect government money — taxes, spending, debt and so on — to work out over at least the next 40 years.

Of course there are several different possible scenarios, and acknowledgement that forecasting even ten years ahead is dodgy. But the statements give broad guidance on how we’re placed — including what would happen if there were disasters such as major earthquakes, agricultural diseases or — yes — pandemics.

Every statement in recent years has assumed that NZ Super will continue pretty much as it is over the next 40 years — although perhaps with annual increases to match inflation only. Currently, the increases match wage growth, which is usually higher than inflation.

Obviously, in future the starting age for NZ Super might be gradually raised to, say, 67. And there are no guarantees that a future government won’t means test Super so wealthy people get less or nothing.

But we’re talking here about people living on NZ Super alone, or with a small amount of other income.

It’s true that everything’s seems to be up for grabs these days as far as government money goes. But I can’t see New Zealand pushing our elderly into poverty. Kindness aside, they and their children would be too powerful a voting bloc.

AThanks for telling us more. Your small addendum actually became quite large, because I went back to you with questions.

I wouldn’t like to see others counting on making big money on buying and selling property. Prices don’t always rise obligingly.

But I’m sure your letter will inspire many others to hit the road in retirement — Covid willing.