Nursing Home / Long-term Care Financial Assistance in PEI

September 2024

Introduction and Background

Many people have questions about the cost of nursing homes (also called long-term care homes) in PEI.  Are you concerned about “losing everything” if you need to go to a long-term care facility, which I will call a “nursing home” throughout this article.  Please understand that rules for nursing homes differ from those for community care homes (also called assisted living facilities or retirement homes) and seniors’ apartments.  These latter facilities are for individuals who can look after themselves but perhaps would like or need some assistance with things such as meals and medication.  I discuss financial assistance for community care very briefly at the end of this article.  The rules are very different from long-term care.  Nursing homes are for people who need around the clock nursing care, and is the topic of this article.

Costs to residents of nursing homes were reduced substantially by changes to the Long-Term Care Subsidization Act and related regulations that were changed in 2007, with later updates.  Your assets are no longer required to be sold before you are entitled to a long-term care subsidy, as was the rule prior to 2007.  Changes in 2020 were made related to how subsidies are calculated, with a significant change related to married or common law couples, as discussed below.

Admission to a long-term care facility involves two steps. The first is a “needs” assessment from a medical perspective. The second, and the topic of this article, is a financial assessment if you are applying for a subsidy.  If you are eligible for a subsidy, the government will pay for all or part of your nursing home costs based on the amount of your income reported on your tax return.

Please note that the financial amounts and any other facts discussed in this article can change at any time.  I cannot guarantee that they will be correct at the time you read this, so enquire accordingly.  And, I confess, this is a complex article.  I provide the following topic listing, mostly in the form of questions, to help you find your answers.  You may also wish to review my articles, “Questions to Ask When Comparing Long-term Care Homes” and ” Checklist for Moving to Assisted Living.

Topic Listing

1. 1. If admitted to a nursing home, what will I need to pay for?
   2. How much does a nursing home cost?
   3. Will I be eligible for financial assistance?
   4. Must I sell my assets to pay for my nursing home accommodations?
   5. Is my family home safe or will I need to sell it?
   6. How is eligibility for government subsidies determined?
   7. Three significant cautions regarding your application of which you should be aware.
   8. What if my spouse cannot afford to live in the family home after my admission to a nursing home?
   9. After admission to a nursing home, how is ongoing eligibility for financial assistance assessed?
   10. Can I make changes prior to admission to a nursing home to increase my subsidy?
   11. A few closing comments on subsidies.
   12. How do costs work when I am discharged from a hospital to a long-term care home?
   13. What if a person has a life insurance policy requiring annual premium payments and income is not sufficient to pay for these?
   14. What happens to the monthly comfort allowance if it is not spent?
   15. Are any exceptions made?
   16. Who do I contact for further information?
   17. What happens when a person moves from community care to nursing home care?
   18. What if a person does not require nursing home care but cannot afford the costs of living in a senior’s residence or community care facility?
   19. Important tax considerations related to real estate transactions
   20. A few final comments.
   21. Did this article help you as a resident of P.E.I.?

1. If admitted to a nursing home, what will I need to pay for?

Expenses for nursing and medical care will be paid by the government.  The expenses that must be paid by a resident will be the costs of accommodation, including room and board (i.e., meals), and certain personal and health care expenses.

The 2019 fact sheet, Facts about Nursing Home Costs – 2019, (still online as of January 2024) states that resident’s long-term accommodation costs that are considered eligible for a subsidy will not include costs for private room accommodation.  However, these rules are gradually changing as homes are built or renovated, and may now include a private room. You should enquire ahead of time if this is important to you (more discussion below).  Also excluded from covered costs are telephone service in a residence room; Internet and/or television services; hairdressing; dry-cleaning; transportation services; and accompaniment to an off-site appointment or event.

This same fact sheet lists certain healthcare related services that are generally excluded from coverage, including ambulance services; prescription drugs; audio/dental/vision services and products; continuous oxygen therapy; physiotherapy; private duty nursing or other healthcare providers; and podiatry services. Note that foot care provided by registered nurse or licensed practical nurse is covered where medically necessary.

More information about what is covered and what is not covered is included in the above fact sheet.

2. How much does a nursing home cost?

The cost of government nursing home accommodations was set at $114.67 per day, effective July 1, 2024, up from $105.78 in 2023, and will likely be adjusted annually in the future. For a year of 365 days, this is $41,854.55. This is the cost of living in a government owned nursing home (long-term care facility); private facilities set their own rates and can be much higher.  Some homes may charge less, and I know at least one that charges over $190.00 per day.  There is a “comfort allowance” provided to residents for personal use, which is currently $130.00 per month, to be used for personal purposes.  The unspent portion of the comfort fund is refundable when the resident is no longer at the home.  As a caregiver, you should ask to review the accounting for the comfort fund to ensure the money is received and all charges are legitimate.  The total of the daily charge plus the comfort fund totals just over $403,000.  The government currently states that the eligibility for a subsidy is someone with net income of less than $43,000, determined as explained below.

3. Will I be eligible for financial assistance? 

You may be eligible for a subsidy if your income (or the average income for you and your spouse) falls below a specific threshold, which I shall refer to as $43,000 based on the current rates discussed in the previous section.  For residents eligible for a subsidized rate, if a person had absolutely no income, the full cost of a government nursing home would be covered.  For those with income less than $43,000, they would be expected to pay the amount of their income to the home, and would receive a subsidy for the balance.

You do not need to disclose your financial information to the nursing home unless you are applying for a subsidy.

The long-term care subsidy is applicable for both public manors and private long-term care residences.  Assume you are not eligible for a subsidy (i.e., if your income is over $43,000 at current rates). For a private nursing home, you would pay costs determined by that home, which are not regulated and can increase whenever the private operator wishes to do so based on your contract with them. At $190.00 per day, this would be almost $70,000 per year.

However, if you qualify for a subsidy, your private rate will be reduced to the same as the government subsidized rate.  Self-paying residents with no subsidy may be paying $70,000 per year, but because your income is less than $43,000, your payments will be based on the $43,000 limit.  However, you may be required to live in a standard semi-private room in the private nursing home. If you wish to have a private room, then you receive a subsidy up to the $43,000 limit, and you will be responsible for the costs above that amount.  As a subsidized resident, your income will be fully used to pay your rent.  The amount above $43,000 for a private room will need to come from use of your savings, sale of your assets or from other means, such as contributions from your family. As noted earlier, the semi-private requirements are gradually changing and may or may not be applicable to you – you should enquire before choosing your home of choice if this is of concern to you, even if you do not expect to apply for a subsidy until a future year.

If your net income exceeds $43,000, you will not qualify for a subsidy.  (Remember, these rates will change.)  I will explain below how your subsidy is calculated.

Caution: Your eligibility is reviewed and your subsidy is modified each year.  If your income is over $43,000 for one year because, for example, you had a capital gain on your tax return, you will need to pay the full cost of your rent for the following year.  Assume you gifted (or sold) your cottage to your children in 2024.  This is required to be reported on your tax return.  If you had a taxable capital gain that resulted in a net income of $45,000 on your 2024 tax return, you would lose your subsidy starting in 2025.  If you live in a private home with an annual cost of $70,000, and your net income on your tax return is over $43,000, you will need to pay the full $70,000 for the following year.  Make sure you have enough money set aside to pay your rent after any taxable transactions that increase your income.  A lump sum withdrawal from an RRSP or a RRIF is another common income item that can create this situation.

4. Must I sell my assets to pay for my nursing home accommodations?

Effective for costs incurred starting January 1, 2007, your assets will no longer be considered when you apply for government assistance. It is only net income as reported for tax purposes that will be used to pay for your qualifying nursing home expenses. Therefore, any bank accounts, investments, real estate and other property owned by a family need not be sold to help pay for such care. However, any income generated from such property is counted. Common forms of income include Canada Pension Plan (CPP), Old Age Security (OAS), Guaranteed Income Supplement (GIS), pensions, rent, interest, dividends, capital gains (e.g., on sale of property),  Registered Retirement Savings Plan (RRSP) withdrawals and Registered Retirement Income Fund (RRIF) payments.  It is all income, minus deductions, included on line 23600, “Net Income” on your tax return.  If you (or your Power of Attorney) sell or gift some investments or real estate to another party, you may have a capital gain on that sale; if so, remember that your subsidy will be reduced or eliminated because of that gain for one year.  See my caution in the preceding section.  Incidentally, such one-time gains may also reduce your Old Age Security and Guaranteed Income Supplement, depending on your financial circumstances.  Obtain some tax and financial planning advice before doing any type of property transfer; it may be better to postpone such transfers.

While assets will not need to be sold to pay nursing home costs, if there is still a spouse living in the family home, that spouse may need to sell assets to pay for their ongoing expenses.  That will depend on their own income and costs (see more below).

5. Is my family home safe or will I need to sell it?

As noted above, and fully explained below, only your “net income”, not assets such as your home are used to calculate your subsidy. The government will not require the sale of your home to meet nursing home costs if you qualify for a subsidy. However, as explained above, if your spouse is placed in a nursing home and you are living in the family home and cannot afford to pay all your expenses, you will need to look at various ways to deal with these costs. Selling the home or other assets may be options; however, this will be your choice based on personal financial planning considerations. It is not a government decision.  See more details below about one spouse remaining in the home.

6. How is eligibility for government subsidies determined?
   1. Overview

The application for financial assistance is separate from the medical application for admission to a long-term care facility. If you do not want financial assistance (or know you will not qualify), no financial information needs to be provided to the government.  However, when you complete the admission application, be sure to know the rates charged by those homes you are listing as your three preferences.  See “A few final comments” below about choosing a home.  If you only have one preference, I understand that you need not list three names, but you may wait longer or be placed in a different home until a space becomes available in the home you prefer.

a) Calculation for an individual regarding the subsidy

Eligibility for a subsidy is based on income, as discussed above.  The most recent personal tax return will be used to determine your income, based on the amount reported at line 23600 “Net Income”.  An application will not be processed if the prior year tax return has not been filed and is overdue. On an annual basis, your subsidy will be reviewed based upon receipt of the most recent tax return and that net income will be used to determine the subsidy until the next tax return. In other words, the subsidy is based on the prior year’s income, not the current year.

Your tax return line 23600 is used without any adjustments.  Unlike prior to 2020, net income from the tax return will no longer be increased for non-taxable income or decreased for certain other adjustments to reach a more accurate evaluation of the resident’s actual cash flow.  For example, most investment portfolio dividends are reported on your tax return at an amount 38% higher than the actual dividend you receive.  For example, $1,000 is reported as $1,380, and it will be $1,380 that is counted as income, even though you only received $1,000.  This means that your subsidy is reduced by $1,380 even though you only received $1,000.   If this is a concern, it is a topic to review with your investment advisor.  On the other hand, only 50% of capital gains are reported on your tax return, and this is not adjusted upwards for determining your subsidy.

It is strictly line 23600 without adjustment that is currently used (unless you take steps to reduce this figure that the government deems to be abusive).  You may wish to verify the calculation method before you apply for the first time in case the rules have changed.

b) Calculation for married or common-law couples regarding the subsidy

Where the person needing long-term care is married (or common-law) and still living together before the move to long-term care, you have a choice on your initial first-time application regarding how eligible income will be calculated.  This choice applies for every year thereafter.

1. 1. You may apply jointly as a “couple”, in which case the income of both parties will be combined and then averaged (i.e., divided by two); or,
   2. The application may be filed as an individual, using only the tax return of the person requiring long-term care.

This decision can have major long-term implications, so consider it carefully.  Once the application as a single or couple is made, that decision cannot be changed in a later year.  Always remember to consider expected incomes in future years – do not make a decision based only on the year of admission.  For example, assume you are age 71 or younger, and your RRSP is still intact. Starting at age 72, minimum withdrawals from your Registered Retirement Income Fund (created from your RRSP) will be required. This will be additional income and have an impact on your subsidy calculation.

Assuming the cost of accommodations and maximum subsidy is $41,000, here are some examples of the impact of this decision:

• Example 1: When an individual application is better

Assume that the spouse entering the nursing home has net income of $25,000 on tax return line 23600, whereas the other spouse has an income of $70,000. Using the joint application method, these amounts would be combined and divided by two, giving $47,500. This figure exceeds the threshold for a subsidy, so no subsidy will be received and the full cost of accommodations would need to be paid by the individual or their family.  On the other hand, if the individual application was used, income is only $25,000, and a subsidy of about $18,000 would be received – quite a difference.

• Example 2: When a joint application is better 

Consider a couple, Mr. and Mrs. A, who are both age 68 with incomes of $25,000 and $35,000, respectively, which is an average of $30,000.  If the lower income person, Mr. A, is moving to a nursing home, the individual calculation would yield the higher subsidy, similar to Example 1, with a subsidy of $18,000 ($43,000 cost of rent minus $25,000).   In this case, let us assume it is the higher income person, Mrs. A,  moving to long-term care.  The individual application method would give her subsidy of $8,000 ($43,000 minus $35,000).  However, the joint method would be better because it provides $13,000 instead of $8,000 ($43,000 minus average of of $30,000).  In this particular circumstance, it would clearly be an advantage to apply as a couple.

• Example 3: When it could go one way or the other – or when things change

Consider the same couple as above in Example 2.  However, Mr. A has substantial money in his RRSP.  Assume the mandatory withdrawal to Mr. A is $27,000 starting at age 72. This increases his income from $25,000 to $52,000, while Mrs. A remains at $35,000, and the new average is $43,500.

If Mr. A is in a long-term care home, he will no longer receive any subsidy because his individual income and their average income both exceed the subsidy limit of $43,000.

If Mrs. A is the person requiring long-term care, an individual application will still give her a subsidy of $8,000 ($43,000 minus $35,000).  However, if she already applied using the joint application (based on example 2), she cannot change, and will no longer be entitled to a subsidy because their average is $43,500.  This is why it is important to look forward and consider future income.

Of course, life expectancy is an important factor also.  While the average life expectancy in long-term care is approximately three years, individual life expectancy will depend on the health of the resident.   Financial planning is required, and challenging without a crystal ball.  This is summarized in Caution #1 below.

7. Three significant cautions regarding your application of which you should be aware.
   • Caution #1: You cannot change your mind later on the type of application.

You cannot change your mind going forward so be sure to consider not only this year’s income, but your expectations going forward.  Expanding on my earlier comments, one or both spouses may not yet be receiving Canada Pension Plan or Old Age Security, or may be entitled to receive income from a work pension or an RRSP in the future.  In particular, if no money is being taken from an RRSP, remember that withdrawals must start after age 71.  This income could have a significant impact on the calculation under the individual or the joint method and should be considered at time of the first application.  Unfortunately, there will be no clear answers in many cases because life expectancy is usually the unknown factor.  If a person’s income will increase at some date in the future, but he or she does not live that long, such income will be irrelevant.  Still, you need to plan ahead.

• • Caution #2: Your tax preparer needs to be aware of these rules.

As I said above, once your choice is made, you are committed to that decision.  Your future tax returns will determine your future subsidies.  There will be no retroactive adjustments to the prior year subsidy for changes in income. For example, the 2023 tax return will determine the subsidy for mid-2024 to mid-2025 (until the 2024 tax return is processed.) Upon review of the 2024 tax return, the new subsidy will be established for the following year (explained further below).

Your tax preparer may be implementing a tax plan to reduce your taxes that could result in less subsidy to you.  When your financial planner or tax return preparer is making recommendations to reduce your taxes, he or she must also be aware of the long-term care subsidy implications.  Decreasing your income by $10,000 may save you $3,000 of income taxes but could reduce your spouse’s subsidy by $10,000.   For example, your Canada Pension Plan may be shared with your spouse. Your taxpayer or financial planner may recommend that you share your CPP to save taxes. The sharing will decrease one person’s income and increase their spouse’s income, and may result in a net savings of tax. If it is the lower income spouse that is moving to a nursing home, this could result in a much bigger reduction in subsidy than it provides in tax savings. Conversely, when it is the higher income spouse moving to a nursing home, such CPP sharing may increase a subsidy (assuming he or she is below the income threshold). See the Government of Canada web site or telephone Service Canada to learn more about CPP sharing, including how to apply or how to cancel.

A larger impact can occur where “pension splitting” is used (which is unrelated to CPP). This is an annual option where up to 50% of certain pension income can be transferred from one spouse to another on their tax return. This is typically done for lifetime pensions from work, and RRIF withdrawals at age 65 or later.  This is often done automatically by tax preparers (or their computer software) to save taxes.  Therefore, you need to ensure your tax advisers are aware of this long-term care impact. This pension splitting will have a major impact (either positive or negative) on long-term care subsidies where an individual application was filed.

In my Example #3 above, it would be normal for a tax preparer to move up to 50% of Mr. A’s RRIF payment of $27,000 to Mr. A to save taxes.  This pension splitting could reduce overall taxes by about $500.  On the other hand, by doing this, the tax preparer would increase Mrs. A’s net income above $43,000 and eliminate her entitlement to the $8,000 subsidy (if she had used the individual application).

In conclusion, any subsidy will be affected each year by such discretionary decisions when the tax return is prepared.  Again, you need to be careful with your planning.  It may be possible to amend a prior year tax return to change certain discretionary allocations, such as pension splitting.  However, while the CRA are quite agreeable with changes to correct errors and omissions, they are not always cooperative with people wanting to use hindsight to do “retroactive planning”.

• • Caution #3: Remember the impact on the spouse remaining at home – a joint application may be better.

There is another aspect to be considered when deciding whether to use an individual or joint application.  Which method will provide the most income for the person remaining at home to continue to support themselves?

When using a joint application, the government will increase a subsidy to ensure that the spouse remaining at home has an income at least equal to the Statistics Canada Low Income Measure (LIM).  In 2023, the spouse remaining at home was entitled to retain a minimum income of $27,352, which I will round to $28,000 for discussion purposes.  This minimum guarantee will only be available when subsidy applications are made as a couple.

For example, assume Mr. B has an income of $15,000 and Mrs. B, the spouse, has an income of $20,000. If Mr. B enters a long-term care facility and applies individually, the income of $15,000 would result in a subsidy of $28,000 per year.  This is calculated as the full cost of $43,000 (using 2024 approximate rates) minus income of $15,000.  Mr. B will pay rent of $15,000 and Mrs. B will keep her individual income of $20,000 for her own expenses.

The alternative is to apply jointly, for which their average income would be $17,500.  Using this method, it looks like, at first, that Mr. B would be expected to pay $17,500 in rent, instead of $15,000, and that Mrs. B would only have $17,500 to support herself in the family home.  However, this is where the Low Income Measure of $28,000 helps out.  The government will calculate Mr. B’s income for subsidy purposes based on their combined income of $35,000 minus the $28,000 LIM kept by Mrs. B.  The remaining balance of $7,000 will be paid by Mr. B for his rent, instead of the normal $17,500 or the $15,000 under an individual application.  This is a subsidy of $36,000, much higher than available in the individual application.

I apologize for making your head spin, but it gets worse.  Even with the increase in Mr. B’s subsidy, an important question is, “Will $28,000 be enough for Mrs. B to keep the family home?” Can she support herself on this income plus whatever else she has saved plus the assets she owns that can be sold? If she sells some assets, such as a family cottage, her investment portfolio, or some land, will this trigger a capital gain that will impact Mr. B’s subsidy? If she draws more money out of Mr. B’s RRIF/RRSP to help support herself, this will increase income and impact the subsidy also.  Lots of financial planning is required.

8. What if my spouse cannot afford to live in the family home after my admission to a nursing home?

If a joint application is filed and one person remains in the family home, that person will be entitled to keep an amount determined by the Low Income Measure as produced by Statistics Canada based on the size of the household family unit – see the Statistics Canada web site here.

See my example and explanation in Caution #3 above.

If you are married and live in a large family home after your spouse has moved to a nursing home, the Low Income Measure may be insufficient for you to maintain the home.  In such a case, you may have to sell other personal assets to maintain your own standard of living.  When you may have no other financial resources from which to draw, it is likely that you will need to move to less expensive accommodations, and/or look to social assistance for help (discussed further below).  With the new 2020 regulations, variations will no longer be made to subsidies to help out the person living in the family home.  As explained in Caution #3 above, asset sales with capital gains or RRSP withdrawals will reduce the subsidy, and may not help cash flow to meet the living expenses as much as you expect.

9. After admission to a nursing home, how is ongoing eligibility for financial assistance assessed?

The person’s ability to pay for long-term care will be reassessed annually (based on the individual or the couple’s tax returns, depending on the first application made).  Your subsidy will be reviewed upon receipt of the most recent tax return in the spring of each year.  The new subsidy rate will start at the time that the processing is completed, with no retroactive adjustments.  However, if there is a specific “request for review” made by an individual, then a retroactive adjustment to the date of the request will be considered.  Perhaps your prior year return included social assistance while you were living at home or in community care; social assistance is not applicable for long-term care residents.  Hence, it may be appropriate to reduce line 23600 by the amount of social assistance, which would be at the discretion of the Minister of Health and Wellness and advisers.

Current rules use last year’s income tax return to determine this coming year’s subsidy with no further changes.  If your income has gone down since last year, this will require you to use some of your savings for the current year; it will be next year that you see the rent reduction.

It is important to note that an increase in your income above the subsidy threshold in one year will cancel your subsidy for the next year.  Assume you are living in a private home that charges $60,000 per year for your room to a self-pay (non-subsidized) person.  While you are subsidized, you would only pay the amount reported on line 23600 of your tax return if you are eligible for a subsidy, which might only be, for example, $20,000.  If you exceed the threshold on your tax return in one year, you would be disqualified from the subsidy for the next year and would need to pay $60,000.  This may or may not be a problem for you, depending on the reason for the increase in income.  You might have the money to pay the increased rent from the source of your prior year income, or from the proceeds on sale of real estate that triggered a one-time capital gain.  However, if the gain was the result of a gift of property to your children, you may find yourself in financial difficulty.  Be sure that you (or your Power of Attorney) plan ahead before gifting or selling property, making large RRSP/RRIF withdrawals or doing other things that will impact your tax return line 23600.  If this situation arises, try to prepare your following year’s tax return early and deliver it to the government to get your subsidy reinstated as soon as possible.

As noted earlier, this understanding is based on my discussions with the government, and policy is always subject to change. Therefore, the system may not function exactly as outlined here and may change.  You should verify the information that I set out in this article.

10. Can I make changes prior to admission to a nursing home to increase my subsidy?

I do not recommend trying to “beat the system”, such as giving money to your family to reduce your income.  It is a very high risk manoeuvre, especially if you will rely on family to keep the money for your own needs.  For example, suppose you give your investment portfolio to your children to lower your income in case you need to move to a long-term care home.  First, this gift will likely trigger immediate capital gains taxes (a gift is taxed as a sale for fair market value).  Thereafter, the related interest, dividends and capital gains will belong to your children.  Are you hoping they will use it for your benefit in the future, giving you some when you need it?  What if the child uses this money themselves because of addiction issues, or if they go through bankruptcy, or hold it in joint name with a spouse who spends it, or they are sued and lose the case, or just spends it on other personal matters?  For the sake of possibly increasing a subsidy if you move to long-term care, you could lose the whole asset.  In addition, when would you do this? Few of us know when we will require nursing home care, and as that time comes closer, we will more likely be in denial that the time is soon.  The earlier you transfer your money to family members, the higher the risk that it may be spent.  You may be left with insufficient money to live your normal retirement (even if you never need to move to a nursing home).

For example, Mr. and Mrs. Smyth transfer their $400,000 of retirement investments to their son, Tom, who agrees to give them whatever they need from that money whenever they need it.  Of course, Tom needs to pay tax on the $20,000 of income earned each year, but he is okay with that.  Unfortunately, Tom is at fault in a car accident, and is found liable for $2 million.  He only has $1 million of insurance and is forced into bankruptcy.  Alternatively, Tom starts a business and it fails, resulting in bankruptcy.  Mr. and Mrs. Smyth have now lost their life savings – not only the annual income of $20,000, but also their principal of $400,000.  If they had kept the investments, and Mr. or Mrs. Smyth had entered a nursing home, their principal would have been safe, and perhaps most of the $20,000 (depending on the amount of other income they have from Old Age Security, Canada Pension, etc.).  Was this plan worth it?

Be sure to review any aggressive plans with a professional financial planner and/or your legal counsel.

Remember that, under the current rules, your investment principal will be safe if you are eligible for a subsidy; it is the income that must be used. A question arises about what will happen if income-producing assets (e.g., investments) are sold or re-structured after you are in a nursing home, and consequently your income declines.   You would likely not be entitled to an increased subsidy if you deliberately made such changes to increase the subsidy.  However, this answer may be different if the proceeds are used for purposes permitted by government policy. I cannot advise as to what the allowable purposes may be, but repayment of liabilities, major household repairs, health costs and prepayment of funeral expenses would seem reasonable and might be acceptable.

What does the law say about this reorganizing your personal financial affairs to increase your subsidy? Regulation 2(5) to the Long-Term Care Subsidization Act now states, “An application for financial assistance shall be considered to be consent by the applicant and the applicant’s spouse, if a joint applicant, for third parties to release to the Minister information required by the Minister for the purpose of (a) determining whether an applicant is a person in need; (b) planning, delivering or funding programs, allocating resources and evaluating or monitoring programs; and (c) detecting, monitoring and preventing fraud or any unauthorized receipt of financial assistance.” This differs from former Regulation 10(1), under which the government would look back two years before the date of application to see if the “applicant has transferred or reduced income, or divested himself or herself of any income-producing asset.” If, “in the opinion of the Director, the transfer or reduction of income, or divestment of an income-producing asset, was made for the purpose of making the applicant eligible for financial assistance”, subsidization could be refused.

11. A few closing comments on subsidies.

The calculation of the subsidy is now a lot easier mathematically, but much more difficult for couples because of the planning required.  Having your tax return done using options that are favourable to you for subsidy calculations will be more important than tax savings in many cases for couples.  Ensure your tax preparer is aware of these rules.  No one will have an issue with doing financial planning which is fair, reasonable and above board.  The government will expect the spirit of the legislation (see Regulation 2(5) discussed above) and related entitlement to subsidies to be upheld and for any financial or tax planning initiatives to be for legitimate reasons other than solely to increase a nursing home subsidy.  One such example that would possibly be considered as inappropriate would be the use of pension splitting for tax purposes where a pension amount was transferred from a lower income taxpayer (receiving a subsidy) to a higher income taxpayer.  This is normally the opposite of what would be done for tax planning purposes, and if done solely to achieve a higher subsidy, may result in a challenge from the government.

12. How do costs work when I am discharged from a hospital to a long-term care home?

If you are officially discharged from a hospital but still remain in the hospital, you are considered as being in Alternative Level of Care (ALC).  Your healthcare coverage for being in the hospital will stop, and you will be expected to pay the government rates for a long-term-care bed.  In addition to this unexpected cost, there are a few other issues to consider.

You (or your caregiver) will be provided with an application that asks you to choose up to three choices of long-term care homes.  While these may be listed as one, two and three, each location is of equal priority and when you are placed at one of those locations, it will normally be your final location.  You are not moved from choice number 3 to choice number 2 or 1 at a later date.  If you list only one choice, that is the location to which you will be placed when an opening arises.  However, the wait could be longer because it is your only acceptable solution.  If you are assessed as needing a long-term-care bed while you are in hospital, you may be placed at a location that is not on your list until one of your three choices arises.  This is necessary to open up a hospital bed for someone needing acute medical care.  Of course, if you are moving to long-term-care from your family home, you will remain at home until such time as your choice arises.

The financial consideration here is this: if you are going from your own home or from the hospital to a long-term-care bed to a location of your choice, you will pay the going rate for that location if you do not qualify for a subsidy.  You would expect that.  However, what if you are moved from a hospital bed to a temporary alternate location?  If that temporary location is a private home, the rate may be higher than what you expected based on your choices, and may not be affordable for you.  What can you do?  I understand that you would be expected to negotiate an affordable rate directly with the particular private long-term-care home.  Hopefully, you would be successful in negotiating a rate based on your tax return net income, in the spirit of current legislation.  If the regular rate is reduced for you, you may be required to live in a semi-private room instead of a private room.  If you are unsuccessful in negotiating an affordable rate with that particular home, you can appeal through the legislation and ask for intervention by the government to have the private home rate adjusted to make it affordable for you.  Even with that approach, if you are offered an affordable semi-private room and you refuse it, you will be expected to pay the rate imposed by that private home.  That means you may need to sell some assets or use your savings to meet the costs.

13. What if a person has a life insurance policy requiring annual premium payments and income is not sufficient to pay for these?

The government uses your income tax return to assess your need for subsidy, and your income will be used to pay your nursing home costs. You may need to sell assets to pay such premiums.  If you cannot afford to pay your premiums, and you would like to keep the policy, I suggest that you ask your insurance beneficiaries, who are going to receive the proceeds of your insurance, such as your children, to pay your premiums.  Permanent insurance policies, such as whole life, can be a great investment for your beneficiaries – for a few dollars in premiums they may receive a substantial tax-free death benefit when you die.  Before cancelling any permanent life policies (usually called whole life or universal life), obtain advice from a professional financial planner.  You should also not cancel a plan without a checkup to  ensure you are in good health and are not likely to need the insurance in the near future because on an undiagnosed disease.

14. What happens to the monthly comfort allowance if it is not spent?

Residents are given a monthly allowance for personal use when eligible for a subsidy. The comfort allowance accumulates and any balance remaining at death will be paid to the resident’s estate, after any other debts owing to the government are paid.   You are entitled to receive a statement when you ask, and should be receiving an annual statement automatically each year.  I recommend you review the comfort allowance statement periodically to ensure all transactions are correct and that no mistakes have been made.  Invoices should be available for all items on the statement.

15. Are any exceptions made?

The Government of PEI retains a right to make adjustments in circumstances that they deem are necessary.

16. Who do I contact for further information?

For information on eligibility for entrance to a nursing home, you may contact one of the five Home Care Offices. Contact telephone numbers are as follows: Charlottetown (Hillsborough Hospital) – 902-368-4790; Summerside (Wedgewood Manor) – 902-888-8440; O’Leary Community Hospital – 902-859-8730; Montague (Riverview Manor) 902-838-0786, and Souris Hospital – 902-687-7096. For information on subsidies, contact the Long-term Care Subsidization Office at 1-888-365-5313. The government web site for Health PEI, where long-term nursing care fact sheets and contact information can be obtained is www.healthpei.ca/longtermcare.

17. What happens when person moves from community care to nursing home care?

If you live in a private community care facility that also houses long-term care residents, that home’s policies will play a role in whether you move to long-term care in the same complex. Placement in a facility is governed by a long-term care committee, and is not under control of an individual home, although the resident’s preference is considered (as indicated on the application).  If you do qualify for a subsidy, your rate will drop to the same price as for a government manor but you may be required to accept semi-private accommodations.  The use of semi-private accommodations has come under scrutiny as a consequence of COVID-19, and these rules are gradually changing; you should ask about the current rules when selecting your preferred long-term care home.   If you want a private room in a facility where only semi-privates are available for a subsidy, your subsidy will still be based on the normal income limits.  If you take a private room, then any additional cost will need to be paid by you from your assets (or from other sources, such as your family).

18. What if a person does not require nursing home care but cannot afford the costs of living in a senior’s residence or community care facility?

In such a case (e.g., living in a community care facility), the Long-term Care Subsidization Act does not apply, and the rules discussed above are irrelevant. A person living in a senior’s apartment or a community care facility (also called an assisted living facility or retirement home) is “almost” the same as anyone living in a family home or apartment they cannot afford.  They may need to look for more affordable housing or seek financial help from family, friends or social assistance (also known as welfare) (See the Social Assistance Act and Regulations and the policies for eligibility and assistance).  These rules differ from long-term care subsidies, and your assets may need to be sold before you qualify.  Former Social Assistance Policy 4-3 stated, “Real and personal property owned by the applicant is generally to be regarded as a financial resource which the applicant, through outright sale or by using as collateral for short term credit, may draw upon to support his/her needs.” See Policy SA 4.2 issued April 1, 2022 for a discussion of the maximum liquid assets you are allowed to have to qualify for long-term financial assistance under the Social Assistance Act.  Note that your principal residence (yours or your spouse or common law partner’s), a vehicle, up to $5,000 for a prepaid funeral and various other exemptions of assets that need not be sold are listed in the above noted Policy.  I understand that the principal residence may need to be occupied by a family member or be subject to specific requirements, and no social assistance will be directed to the upkeep of the house after you move to another residence.  If the family home is sold, the cash must be used.  In addition, I understand that, effective December 2022, individuals are allowed to retain up to $100,000 of assets and still qualify for social assistance to live in a community care facility.  This $100,000 will need to be used by you to pay for certain other expenses before social assistance will pay those other costs, such as if you need to buy a wheelchair, etc.  Each situation will be considered on a case-by-case basis.  You should enquire about this new rule because the official policy was not published when I updated this article.   Transferring assets to other family members in order to qualify for assistance will create negative issues, similar to those I discussed above for long-term care.

You should note that there are special social assistance rates for licensed community care facilities versus other housing.  For housing assistance rates available to qualifying individuals at the time of writing this article, see the PEI Social Assistance Policy – Shelter Room and Board, including the special rate that applies for someone living in a licensed community care facility, which differs from other accommodations because of the person’s need for additional care.  As at this time, the wording in Regulation 17(1)(d) and 17(1)(e)) states,”(a) Licensed facilities provide “care services” which, in addition to meals and housekeeping, include some supervisory and personal services.(b) Persons requiring such care services shall be allowed not more than $63.65 per day which includes room and board in a licensed C.C.F. [Community Care Facility](c) Persons requiring room and board only shall be allowed not more than $612 per month.(d) Personal care allowances (Instruction 6-5) should be determined on the basis of real need. It may be that some individuals have very few personal expense needs, depending on the seriousness of their condition.”

Paragraph (b) above essentially says that a person staying at a community care facility needing more help than just room and board (e.g., personal care services and supervision) can obtain a subsidy as high as $63.65 per say (about $23,000 per year).  However, if they are physical and mentally able to look after themselves, and just need room and board, then the maximum subsidy is $612 per month ($7,344 per year).  Other policies and rates for social assistance can be found on the PEI Social Assistance Policies web site. Telephone the Department of Social Development of Housing for more information at 1-866-594-3777 or call 211 to be directed to other sources of help.  For example, another scenario that may help a low income person is an application through the Department of Social Development and Housing for the Seniors’ Housing Program (telephone 1-877-368-5770), where you may qualify depending on your income, assets, health, age and present housing for a housing unit where you rent is based on 25% of your income.

19. Important tax consideration related to real estate transactions

As a side note that is unrelated to this topic, I want to point out recent changes of importance in tax law related to home ownership.  As people age, they may look at ways to transfer their home to their children before they pass away.  If you change ownership of your home in any way (for example, sell, gift, change to joint name, use a life interest, transfer to a trust), you must report it on your tax return with rare exception!  In certain cases, such as using a trust, and sometimes using joint name, you may need to file additional tax returns starting in 2022 or 2023, such as the T3 Trust Income Tax and Information Return and the Underused Housing Tax (UHT) Return.  The UHT rules may apply if the property is partly owned by someone who is not a Canadian citizen and is not a resident in Canada, (including as a beneficiary or part owner through a trust, corporation or partnership).  On March 29, 2024, the government postponed implementation of certain rules regarding the need to file a T3 Trust Return for “bare trusts.”   However, if the legal ownership and beneficial ownership of your home are different, or if the home is owned by a trust, get tax advice on your filing requirements.  Get both tax and legal advice before making changes to your ownership.  See my article, Life Interests and the Family Home – Probate vs. Taxes, if you are using a life interest to continue living in your home.

20. A few final comments

The costs of nursing home accommodations are fully deductible as medical expenses.  For an infirm or disabled person living in a community care facility, the portion of the room and board costs related to wages are considered attendant care, which qualify as medical expenses.  See my articles for Taxes and Caring for Parents – What costs are deductible? and Medical Expenses and Taxes – What can you claim?

Preparing to move is a difficult process.  See my Moving Checklist article to help you with planning, particularly packing, for a move.  But in addition to packing, you need to pick a home that is “right” for you (or your loved one).  You can search online for additional help on how to do this, the least of which is to visit a number of homes, take a tour, and visit with some of the existing residents.  Remember that the advertisements and the personal tours are designed as promotional sales tools to show you the best.  It is up to you to talk to residents, family of residents, and references, and do what you can ensure you will be satisfied.  One thing you can do is review annual PEI government inspection reports for the private community care and long-term care residences – take the time to review the detailed report to see where exceptions were found.  Where the cover letter indicates a “provisional” license was issued, look more carefully.  Government homes do not have similar inspection reports.

I suggest you think about what is important to you or your loved one at this stage of life.  If considering your parent’s move, what do they look forward to doing each day?  If it is good food, friends and playing bingo, then look at the menu (maybe have a meal), consider the location to enable friends (and family) to easily visit, and check out the daily activity listing.  Do they need physical assistance – then compare the number of staff and residents in each facility and try to determine how much time care workers will be able to spend with your parent, not only helping them but socializing as well.  What can you do if you find a problem after the move? Is there a private and confidential “whistle blowing” process to avoid any concerns by your parent or by you of negative implications from staff?

As we age and our mobility and cognitive abilities decline, it is more of a challenge to find a reason to get out of bed – make sure your new home gives you that reason.  There is a lot to think about at this very stressful time of life – search online for local caregiver support groups to help you, such as Hospice PEI.

21. Did this article help you as a resident of PEI?

If so, please let me know by way of an email through my contact page on my web site.  If not, I would appreciate any advice on how to improve it.  The article takes a lot of time to keep up to date (and always keep in mind that changes to rules could be made without me knowing about them), and I want to ensure it is time well spent.  Thank you, and I wish you well in your journey.

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Blair Corkum, CPA, CA, R.F.P., CFP, CFDS, CLU, CHS holds his Chartered Professional Accountant, Chartered Accountant, Registered Financial Planner, Chartered Financial Divorce Specialist as well as several other financial planning related designations. Blair offers hourly based fee-only personal financial planning, holds no investment or insurance licenses, and receives no commissions or referral fees. This publication should not be construed as legal or investment advice. It is neither a definitive analysis of the law nor a substitute for professional advice which you should obtain before acting on information in this article. Information may change as a result of legislation or regulations issued after this article was written.©Blair Corkum