As financial planners, we’re increasingly assisting with the decisions around moving into residential aged care.
More often than not, at least one of the person’s children have taken responsibility for getting the move and the financial decisions around this organised. Usually this is because it’s their mum or dad’s reduced capacity to look after themselves that is behind the need to move into full-time care.
There can be time pressures as well. Mum or dad have suffered a more immediate health event which has seen them taken to hospital, and the medical staff, having treated the emergency, advised that your parent should be in full-time care – and they need their hospital bed back.
So what next?
The first step is for your mum or dad to be assessed by the Aged Care Assessment Team – it’s likely that the support team the hospital will have already given you some assistance with this.
Next you’ll need to find a residential aged care provider with an available bed. You can search for a list of aged care homes by location on the Australian Government’s My Aged Care website.
From 1 July 2014, all residential aged care providers are required to publish the amount of the Refundable Accommodation Deposit for their rooms – most will have done this on their own website or otherwise can provide a standard information sheet on request.
What are the financial considerations?
The cost of mum or dad’s care is subject to a number of means tests which vary quite a lot depending on their assets and income.
You (on mum or dad’s behalf) will need to submit a request for an assessment from the Department of Human Services – you can find the form here.
So one of the first things you might need to do is figure out what they actually have. Some useful sources for this information are:
- Previous declarations made to Centrelink or Department of Veterans’ Affairs if your mum or dad was receiving any sort of payment
- Tax returns: most assets will have generated some taxable income in the financial year, so would be included in a tax return (the exceptions are usually tax-free super pensions, or insurance bonds)
- Annual statements for tax-free super pensions or insurance bonds
- Statements for bank accounts
- Dividend statements for shares
A few tips
Experience in this area has left me with a few handy tips to share.
If mum or dad hold shares as an investment, it will be important to consider the capital gains tax implications if shares are sold to fund care costs. To work out this out, you’ll need to know:
- When and for how much were the shares purchased
- Did mum or dad purchase the shares, or were they passed to them as an inheritance from somebody else
- Have they been adding to their holdings with a dividend re-investment plan
If your parent has been working with a tax accountant to file their annual return, they are usually the best place to start with this information.
You may also want to consider the role of the family home. For some families, retaining that specific home within the family might be an important goal, others may expect that it would be sold or rented out to fund the cost of care. If you can have that conversation with your parent and other family members beforehand, you’re in a much better position to evaluate your options.
PS: if your mum or dad has given any money away in the five years prior, even if they weren’t receiving any age pension or Department of Veterans’ Affairs payments at the time, it may still affect their aged care payments. It’s important to discuss this with your financial planner if it applies to you or your parent’s situation.
What we can help with
A financial planner can help you with a plan for your parent’s entry into aged care. The types of question you can have answered are:
- What will the cost of care be, including means-tested fees?
- How can assets be structured to fund the care fees?
- What are the tax impacts of any changes?
- How will estate plans be affected?
- What does it mean for age pension or Department of Veterans’ Affairs payments?
Entry into residential aged care is a mixture of social security, investment and cashflow decisions on the financial planning side. Throw into the mix care decisions, family dynamics and often time pressure as well, and it’s not an easy time.