NZ Aged Care Reform 2026: What Families Need to Know
Planning where and how we will live as we get older involves much more than choosing between staying at home, moving into a retirement village or eventually entering residential care.
There are financial and legal decisions sitting behind each of those choices. Who owns the family home? Is it held personally or by a family trust? What happens if one partner needs care and the other remains at home? Would the Residential Care Subsidy be available? What happens to the retirement village occupation right if circumstances change? Are Enduring Powers of Attorney in place? And does the estate plan still work once assets have been reorganised?
Those questions may become even more important following the release of A place to grow old: Securing the future of aged care, the report of the Ministerial Advisory Group on Aged Care.
The report proposes substantial reform of New Zealand's aged-care system, including changes to how care is delivered and how its cost might be shared between the Government and older New Zealanders.
For families planning ahead, there is an important point to understand from the outset:
These are recommendations. They are not yet the law.
The rules applying to the Residential Care Subsidy and other forms of aged-care support have not suddenly changed because the report has been released. But the report gives us a useful indication of where future policy may be heading.
Why is aged care being reviewed?
New Zealand has an ageing population, and the number of people requiring support at home or in residential care is expected to increase substantially.
At the same time, the aged-care sector is dealing with pressure on residential-care capacity, workforce shortages, increasingly complex care needs and concerns about whether the existing funding model is sustainable.
The Government established the Ministerial Advisory Group to consider three particularly significant questions: how aged-care services should be funded sustainably; how the cost of care should reasonably be shared between Government and the people receiving it; and how aged care can operate as a more integrated part of the wider health and disability system.
The resulting report looks beyond simply providing more rest-home beds. It considers a much broader continuum of care, including helping people remain at home for longer, improving the transition between different levels of care and reconsidering how people contribute financially towards the support they receive.
For individuals and families, that means aged-care planning is increasingly connected with property ownership, retirement planning, trusts and estate planning.
The Residential Care Subsidy could look very different
One of the areas identified for reform is the way people contribute towards the cost of residential care.
At present, eligibility for the Residential Care Subsidy involves a financial means assessment. Whether assets are included, excluded or treated as having been deprived can make an enormous difference to the result.
The report proposes moving towards a more graduated approach to contributions rather than the present threshold-based system.
That would represent a significant change in philosophy.
Instead of there being such a sharp distinction between someone who qualifies for a subsidy and someone who does not, people with greater financial resources could progressively contribute more towards their care.
Exactly what any eventual system will look like will depend on the Government's response and subsequent policy and legislative work.
For now, the existing RCS rules continue to apply.
What about the family home?
The treatment of the family home is understandably one of the first things families ask about when residential care becomes a possibility.
The answer under the current system depends on the person's circumstances, including whether they have a spouse or partner who continues to live in the home.
The Ministerial Advisory Group has raised the possibility of changing how higher-value homes are treated for means-testing purposes.
That does not mean your home is suddenly available to pay your rest-home fees.
It does mean, however, that families should be cautious about assuming that the rules applying today will necessarily remain unchanged throughout a long retirement.
For Auckland homeowners in particular, the distinction could become important simply because property values can mean that a person has considerable wealth on paper while having relatively modest income available to meet everyday costs.
Family trusts are also part of the discussion
This is an area where there is already considerable misunderstanding.
Putting the family home or other assets into a trust does not necessarily mean those assets will simply be ignored if someone later applies for the Residential Care Subsidy.
The existing means-assessment regime already contains rules dealing with deprivation of property and income, including gifting.
The new report recommends further consideration of the treatment of trusts and gifting when determining how much someone should contribute towards their care.
Again, that is not a new rule taking effect today.
But it reinforces something I regularly discuss with clients: decisions about retaining, restructuring or winding up a family trust should not be made by looking at one issue in isolation.
A trust may have been established many years ago for creditor protection, succession planning, relationship property considerations or simply because that was the prevailing advice at the time. The family's circumstances may now be completely different.
Before changing the trust because residential care is becoming a possibility, it is important to understand why the trust exists, what it owns, what has been gifted to it, what is still owed to it or by it, and what the consequences of changing it will be.
Staying at home may also involve contributing towards care
Another important direction in the report is the emphasis on helping people remain at home for longer.
For many people, that will be welcome. Moving into residential care is not necessarily the preferred option, particularly if more nursing, monitoring and support can safely be provided at home.
But the report also raises the possibility of people who can afford to do so contributing towards some of the cost of receiving care at home.
That creates a much broader planning question.
It may no longer simply be:
“Can I afford a retirement village?”
or:
“Will I qualify for the Residential Care Subsidy?”
Instead, families may increasingly need to consider the likely cost of several different pathways through later life.
Where do retirement villages fit?
Retirement villages and aged residential care are not the same thing.
When someone moves into a retirement village, they will commonly acquire an occupation right under an Occupation Right Agreement rather than purchasing a conventional freehold property. The financial consequences of entering and eventually leaving the village are governed by that agreement and the retirement villages legislation.
Some villages also provide access to increasing levels of care, while others may require a resident to move elsewhere if their needs change.
That is why I think the decision to enter a retirement village needs to be considered as part of a person's wider later-life planning, rather than simply as a property transaction.
Before signing an Occupation Right Agreement, it is worth thinking beyond the immediate question of whether you like the apartment or villa.
What happens if one partner needs care before the other? Can you move within the village? What happens financially if you leave? How quickly is your capital repaid? What assets will you have available if residential care is subsequently required? Does your family trust still serve a useful purpose? Who can make decisions for you if you lose capacity? And does your Will still achieve what you intend after the move?
Those questions overlap.
Planning ahead matters more than trying to predict the rules
There is always a danger when reports like this are released that people rush to restructure their affairs because they are worried about what the Government might do.
I don't recommend that approach.
We do not yet know which recommendations will become Government policy, what the final rules will look like or when particular changes might take effect.
What we can do is make sure the legal arrangements you already have are understood and appropriate for your circumstances.
For someone approaching retirement or considering a retirement village, that might mean reviewing:
- ownership of the family home;
- the purpose and ongoing usefulness of a family trust;
- previous gifting and trust loans;
- Wills and estate planning;
- Enduring Powers of Attorney;
- the proposed Occupation Right Agreement;
- potential Residential Care Subsidy eligibility; and
- how the financial position would look if one partner required care before the other.
The answer will not be the same for every family.
Looking at the whole picture
Later-life planning sits at the intersection of several areas of law.
A decision about a retirement village can affect an estate plan. A family trust can affect how assets are owned and administered. Previous gifting can become relevant to an RCS assessment. An EPA becomes critically important if someone can no longer make their own decisions. The way a couple structures their finances can matter if only one of them needs care.
That is why I prefer to look at these issues together.
I advise clients on retirement village Occupation Right Agreements, family trusts, Residential Care Subsidy issues, Wills and Enduring Powers of Attorney. Looking at the complete picture means we can identify how one decision may affect another and put the appropriate legal arrangements in place before they are urgently needed.
The Ministerial Advisory Group's report may ultimately lead to significant changes in aged care in New Zealand. I will be following those developments closely.
Over the next few articles, I will look separately at some of the proposals that are particularly relevant to families — including possible changes to the Residential Care Subsidy, the treatment of the family home, trusts and gifting, and what increased support for ageing at home could mean in practice.
If you are considering a move into a retirement village, reviewing a family trust or thinking about how your affairs would work if you or your partner needed care, get in touch. We can look at the arrangements you have now and work through the issues that matter for you.