It's a fact of life that many of us will need to one day
face the daunting task of seeking aged care for someone close to us. At first
the complexity of dealing with the personal, practical and financial issues may
seem overwhelming, but there are positive ways to address these issues and
there is help available to navigate through them.
A specialist in the
field of aged care advice can help
people work through the aged care maze.
Sooner or later many
of us need to deal with a relative who is no longer able to manage independently
in their own home. Health and mobility deterioration will eventually lead to a
need for alternative care arrangements. For the relative who is trying to
facilitate this life change, it is often quite a shock when they come up
against the complexity of the transitional and financial issues involved.
To help people gain some perspective and identify what the
priorities should be, a focus on five
key questions on aged care may help.
Question 1 – what are the aged care options?
The degree of care needed is evaluated by an Aged Care
Assessment Team (ACAT). ACAT comprises health professionals and social workers
and their role is to assess if the person needs assistance services at home or
if a move to residential care is needed. In-home care can be arranged through
the Department of Health in the form of Home and Community Care (HACC),
Community Aged Care Packages (CACPs) and Respite Care Services.
If it appears that independent living is too much of a
challenge then they may recommend residential
aged care. There are two
main types of residential care available - hostels
and nursing homes. Hostels provide
assistance with daily living needs, such as meals, laundry and cleaning as
well as a degree of nursing care. Nursing
homes offer more intensive support for higher level of care, including full
time nursing care. When deciding on a facility it is helpful to take a look first hand - to get a feeling for the
standard of care available and to start comparing the pros and cons of
different aged care homes.
Question 2 – what costs are involved?
It has been identified
that the costs of residential care can be the most confronting aspect for the
uninitiated. While the cost
of care is partly funded by the government, there can still be significant
costs to residents which are partly based on their level of assets and income. It may well be that the resident is
required to contribute toward an entry fee plus ongoing daily care fees.
Hostels and nursing homes each use different structures to
calculate entry fees. Hostels ask for an
up-front bond, from which they will
take interest earnings plus an annual deduction of the bond amount. Nursing homes do not require a bond,
but will instead charge their entry fee
as a daily amount. In both cases the resident's
assets may be assessed by Centrelink to determine the level of fee and the
degree of subsidy made by the government.”
Both hostels and nursing homes also
charge daily care fees on top of the entry fee. The basic daily care fee is
generally payable by all residents, whereas the income tested fee is based on the resident’s level of income. At
the very least, the daily care fees will be a large proportion of the age
pension, but they can be significantly higher if a person’s assessable income
is over a certain level.
While all these costs may seem difficult to digest, it is vital to seek some advice on strategies to
minimise them through correct structuring of assets. There are ways and
means to limit fee liabilities so that aged care doesn't end up costing more
than is necessary.”
Question 3 - What will happen to the family home?
In many cases, the
family home will be the major asset involved and once the reality of the
costs of aged care start to become apparent, it may seem inevitable that the
family home needs to be sold to fund these costs - the situation with the
family home needs to be carefully considered.
If a spouse still
remains at home then the value of that home is not assessable for entry fee
purposes and this will serve to reduce the fee contribution required by the
aged care facility. If the home is left vacant, however, then it is
assessable. The question here is whether
it is better to sell the home or to retain it and rent it out - there is no
simple answer to this; as it requires a careful analysis of the resident's
other assets and income. This is one area where an adviser is often able to
relieve clients of the worry of making the wrong decision, by providing an
objective analysis of where the home can fit into the overall plan for
minimising fees and maximising income.”
Question 4 – what are
the impacts on the age pension?
Maintaining age pension entitlements can be a very sensitive area for many people.
If selling the family home is being considered, then it is important to factor
in how this may affect pension levels, as the value of the home should fall
under the assets test once sold.
It may well be possible to keep the home, rent it out and
use the income from this to fund the entry fees. By doing this, both the value
of the home and the rental income generated may still be exempt from the assets
and income tests respectively. Again, there are no simple answers here; it will
depend on individual circumstances. The pension may only be one component of
income, so it is vital to consider the
total income picture and not just the pension in isolation.
Question 5 – how can
ongoing income be maximised?
Optimising ongoing income for the aged care resident can be
quite a challenge once all the complexities of the aged care regime are taken
into account. The need to minimise fees, maximise the age pension, deal with
the family home and structure other financial investments will all have an
impact on what ongoing income can be generated.
Analysing all these issues and structuring
the most effective solution takes some skill to organise. There is a real
risk of poor decisions being made if someone unfamiliar with the aged care
environment either puts these issues in the too hard basket or fails to
properly assess how all the factors interrelate. Anyone in this situation is strongly
advised to seek professional advice from a qualified financial planner to find
the right answers to these five critical questions.
For further
information, contact Hugh Kilpatrick* from RIadvice-RetireInvest on 03 9471
0080.
*Hugh Kilpatrick is an Authorised Representative of RI Advice
Group Pty Limited (ABN 23 001 774 125), AFSL 238429. This editorial does not
consider your personal circumstances and is general advice only. You should not act on any information
without considering your personal needs, circumstances and objectives. We strongly
recommend you obtain professional financial advice specific to your own circumstances.