When it comes to planning the future for yourself or a loved one entering aged care, many decisions must be made. The majority of people entering our aged care system, have experienced a trauma or acute incident where living at home is no longer possible.
This means that many decisions must be made in a short timeframe. 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.
As the largest asset, the family home is typically one of the most significant considerations. However, full of family memories, it is both a highly emotional, as well as financial decision.
The affordability of moving into residential aged care places stress on selling the family home. Knowing that you have choices and access to reliable advice can help provide a better outcome. In this article, we will touch on some of the key considerations about the family home and ways to find the most suitable strategy to fund the transition to aged care.
The following is an overview of these key considerations and not specific advice.
1. Selling your house and your Aged Pension
Selling or keeping your home has implications on your aged pension. If you choose to sell your home, you become a non-homeowner. This means the amount you pay to the aged care 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 can affect the 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 as exempt 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.
2. Who can make a claim on your estate?
Anytime your circumstances change, it is important 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.
3. Updating assets & liability with Centrelink
If you receive a payment from Centrelink or Veteran's Affairs, it’s important to keep updated records every time your circumstances change - including when you move into aged care. The amount you receive after moving into care may change depending on your circumstances. Even a small increase or decrease can make a difference.
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.
4. Who is a protected person – that can continue living in the family home even if you can't?
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:
A resident’s partner or spouse
A dependent child
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)
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
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.
5. The importance of a strategy and understanding your options
There are many choices when it comes to establishing a financial strategy, and everyone's circumstances are different. There are myths and misunderstandings about the rules surrounding aged care and age pension eligibility that can cause confusion in navigating the system.
Whichever choice you make, ensure enough cash flow (or available assets) is available to pay fees and meet other expenses. Navigating through the financial aspects of aged care can be complicated, here are some considerations:
How is your age pension affected?
How to pay for your accommodation?
What will you pay for your ongoing care?
Whether you need to pay any tax?
Whether you have enough cashflow to pay for your care and living expenses?
The impact on your net wealth and your estate?
Specialists in Estate Planning and Aged Care
Having a clear path will prevent stress in making long-term decisions in a time of crisis. Aged care financial advice is a specialist area, and the rules constantly change, as do the available strategies.
We are financial planners and accredited aged care advisers, up to date on the intricacies of estate planning and aged care. No matter where you live in Australia, we are here to answer your queries, so please contact us today.
Bill Savellis
Senior Financial Adviser
Having navigated the Aged Care landscape for both of his parents, Bill understands how challenging it can be to make the right decisions for your future care needs. That's why he believes that everyone should have access to financial advice during this time. Bill has been a Financial Adviser for over 22 years, and is passionate about helping others access the financial advice they need. Drawing from his own experience in the financial sector, Bill develops strategic, personalised plans to support transitions to Aged Care or Home Care.
Disclaimer: Prepared without taking into account your objectives, financial situation or needs. Before acting on any information in this article, Olive Grove Financial Advice recommends that you consider whether it is appropriate for your circumstances. Information in this article was correct and current as of 28 March 2023. Olive Grove Financial Advice is operated by Bill Savellis through The Financial Advisor (Australia) Pty Ltd ABN 72 619 546 431, who is a Corporate Authorised Representative (No. 1278394) of Havana Financial Services Pty Ltd.
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