When it comes to planning the future for yourself or a loved one entering Aged Care, many decisions must be made. A majority of people entering our Aged Care system enter after a trauma or acute incident such as a stroke, fall, illness or dementia-related incident where it has become apparent that living at home is no longer in the loved one’s best interest.
This means that many decisions have to be made in a short period. Decisions include understanding what care will be needed, choosing an Aged Care provider, the cost of care and how to fund the suitable options for your loved one.
The family home is typically one of the most significant considerations. It is often one of the largest assets someone possesses. But the family home is also usually more than just an asset, as it is full of family memories, and at the end of the day, it is both an emotional and financial decision.
The stress of moving into residential aged care can be compounded by anxiety around selling the family home. Some people may find it hard to part with their home or simply not be ready to sell. This can raise concerns about how to afford the fees.
Knowing that you have choices and accessing advice to understand what they are may help reduce stress and create a better outcome. In this article, we will touch on some of the key considerations about the family home when deciding the most suitable strategy to fund the transition to Aged Care.
The following is an overview of these key considerations and not specific advice.
If you sell your home, you will become a non-homeowner. Still, the amount you pay to the service provider as a Refundable Accommodation Deposit (RAD) is exempt from Centrelink and Veterans’ Affairs and may help to maximise your age pension. However, this amount is still assessable when calculating your means-tested daily care fee.
If you keep your former home, you may continue to be assessed as a homeowner for up to two years, with your home remaining an exempt asset for your asset test during this period.
Once the two-year period is over, the value of the former home will be assessed under the non-homeowner asset limits.
You have 28 days after moving into care to let the provider know whether you want to pay the total price as a lump sum (refundable accommodation deposit – RAD) or daily rent (daily accommodation payment – DAP), or a combination of the two.
Your fee structure may be determined by whether or not you sell the family home. The 28 days gives you time to seek good advice to make an informed choice. Planning and professional advice are the keys to quality care and effective decision-making.
Anytime your circumstances change, it is crucial to consider the impact this has on your estate plans. This includes when you move into aged care. We recommend speaking to your solicitor about the ability to review and redraft your will to reflect your wishes. As dementia is a leading factor behind the need for care services, you will likely need to delegate financial decisions to someone else when the time comes.
This is easier if an enduring power of attorney (and guardianship) is in place. So it is vital to have the appropriate powers in place before you or a loved one has lost legal capacity. Once capacity has been lost, it will be too late to set up the powers, and the Guardianship Tribunal will be needed.
If you receive a payment from Centrelink or Veterans’ Affairs, you need to update your records every time your circumstances change. This includes when you move into Aged Care. The amount you receive after moving into care may change. Depending on your circumstances and how your income and assets change, they may increase or decrease.
If you are a member of a couple, you will still have combined income and assets assessed, but you will both start to be paid at the higher single rate of pension. To ensure you maximise your Centrelink or Veterans’ Affairs entitlements, it is important to seek advice from a qualified financial planner to ensure the arrangements are appropriately structured and determine whether it is more effective for you to sell or keep your home.
If a protected person lives in your principal home when the owner or co-owner enters residential care, the home will not be counted as an asset.
A protected person can be:
1. A residents partner or spouse.
2. A dependent child.
3. A carer who has been living in the home for the past two years and is eligible for an Australian Government income support payment (Centrelink benefit).
4. A close relative who is eligible for an Australian Government income support payment (Centrelink payment) and who has been living in that home for the past five years.
5. A protected person living in the home exempts the house’s value from being included in the asset tests applied to determine the level of aged care funding available.
There are choices when it comes to your financial strategy, and everyone’s circumstances are different. There are also many myths and misunderstandings about the rules surrounding Aged Care and Age Pension eligibility that can add to anxiety and confusion about navigating the system.
It is important to make sure whichever choice you make, that you have enough cash flow (or available assets) to pay your fees and meet other expenses. Navigating through the financial aspects of aged care can be complicated, especially as you should take into consideration:
1. How your age pension is affected?
2. How to pay for your accommodation?
3. What will you pay for your ongoing care?
4. Whether you need to pay any tax?
5. Whether you have enough cash flow to pay for your care and living expenses?
6. The impact on your net wealth and your estate?
Having a clear path can alleviate much of the stress of making long-term decisions in a time of crisis in the future. Seeking objective advice can help navigate the aged care system, identifying the information that is meaningful and relevant to your decisions.
Making an informed decision about aged care is incredibly important. Aged care financial advice is a specialist area, and the rules constantly change, as do the available strategies. We encourage you to seek an accredited aged care adviser to ensure you get the most appropriate advice for your circumstances.
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.