The time comes when aged care for a loved one, or eventually yourself, looms as a real possibility. This time of decision making can be highly emotional for all concerned. There are a host of options which can make it all very confusing, just when rational, well considered decision are required.
Our Financial Planning Manager Vicki Adams understands, “This challenging time requires people to understand a lot of facts. It often requires alternative scenario calculations to help navigate your way through the mire of decisions.” Decisions like:
- whether to keep the family home
- what are the costs of aged care and is there a bond to pay
- will age pension entitlements be affected and
- are there any tax implications?
Before you can enter a Government subsidised aged care facility you need to have an assessment done by an Aged Care Assessment Services (ACAS). This will determine the appropriate level of service required including respite care, hostels, nursing homes or Community Aged care packages.
The cost of aged care
There are three types of Government funded aged care: Low level care, High level care and Extra services. The associated fees and charges can be very confusing. They are calculated for each individual depending on the level of assessable assets, personal income and pension entitlements.
Daily care fee: In most cases, aged care residents will be charged the standard daily care fee which is equivalent to 85% of the maximum single age pension.
Daily income tested fee: This is in addition to the Daily care fee and depends on your assessable income (and that of your spouse if applicable) and your pension entitlements.
Accommodation payments: These are used by the aged care facility to improve and maintain buildings and surrounds, and general levels of service. It may be broken down into two components. An Accommodation
Charges may be payable when entering High Care and is based on your level of assessable assets. An Accommodation Bond may apply when entering Low Care facilities and acts like an interest-free loan to the care provider who may deduct a monthly retention amount (set by the Government) for a maximum of five years. The residue of the bond is payable to you or your estate.
Extra services: In order to provide optional additional services to provide a higher standard of accommodation, some aged care facilities will require an additional Extra Service charge.
As explained, the amount of Accommodation Payment is determined based on the value of your assessable assets which includes any property or item that you have an interest in within Australia or overseas. Thresholds do apply. Also, if you have gifted a substantial amount in the last five years, this is also taken into account.
The value of your former home will not be included in the value of assets if, when entering care, a partner or dependent child lives there. Other exemptions may also be applied to your former home and in some cases, keeping your former home may be a worthwhile option. Vicki Adams says, “This is worthy of consideration in some circumstances. But I would strongly urge people to consult us first so that we can calculate if this is the best option.”
Each situation is different
There is no “one size fits all” when it comes to considering entering aged care. Vicki says, “This is a growing area of concern for many people. I would love to explain the various options and help to determine the most advantageous financial paths. We all need to develop plans that will help our money last in the long term.”
It is also worth noting that from 1 July 2014, age care reforms commence. The complexity of the rules increases and for new residents, the cost of aged care services is likely to rise.