How to navigate financial and housing challenges for your parents with dementia

Question: My parents are a couple in their mid 80’s and my Dad has dementia. He presently receives a Level 4 home care package but I can see a time where Mum will not be able to look after him. Apart from their home which is probably worth over a million dollars, they have about $600,000 in super, savings and shares. What will happen if Dad moves into aged care and will Mum have to sell the house to pay for it?

Answer: You parent’s position is very common and fortunately, the very complicated system accommodates these variations but with the underlying principle, that if you are in a position to either fully or partially fund your own retirement and aged care costs, you are compelled to do so through the application of meant tested support and benefits.

Given their asset position, they are only receiving a part pension at present. While they should seek their own financial advice from a specialist aged care financial planner, the critical issue will be Mum’s cash-flow requirements once Dad moves into aged care.

If they decide to cash-in much of the super to meet the costs of the Refundable Accommodation Deposit (RAD) for his room and assuming that exceeds $180,000, Mum will only have the leftover amount in super to generate additional income to top up her pension. If you pay the full RAD amount, you will not have to pay any further money towards his accommodation cost.

As they will be regarded by Centrelink as being separated by illness, Mum will come under the means test thresholds and will probably start receiving the full rate of single pension, currently $1,096.70 a fortnight.

The daily care fee for Dad is a separate calculation.

The basic cost is set to 85 percent of the single rate of basic pension. The facility you choose may also charge an “extra services fee”. How much Dad has to pay will be based on the financial assets they currently have.

Fortunately, because Mum is still at home and they have been living together for many years, the home value for now, is excluded in any calculations.

While the money paid as a RAD is exempt from Centrelink calculations, it is included in Dad’s daily aged care fee calculations.  Even if the RAD is $550,000 the estimated daily care fee Dad will have to pay is about $64 a day.

Given that he will also be receiving $1,096.70 a fortnight as a pension payment from Centrelink, that works out to be $78 a day which covers the $64 a day care fee.

The situation will change significantly if Mum moves into aged care. In this case, the home will remain exempt for Centrelink purposes for 2 years after the move, but a capped amount will be included in her daily aged care fee calculations.

Instead of paying the RAD, a better scenario then, might involve renting the property out and the net rent received might cover the costs of a Daily Accommodation Payment. You would need to re-assess this after 2 years because from that point, the value of the home will be included in Centrelink’s asset test. It is likely that both Mum and Dad will lose their pension at that point and the house sale proceeds will probably be needed to meet their daily care costs.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.