Four Important Steps
in Planning for Aged Care
Getting old is one thing that those of us lucky enough will
need to deal with.
One of the more challenging and complex areas to deal with
is aged care.
Planning for aged care, although includes structuring assets
so as to minimise the costs associated with aged care, needs to include being
aware and understanding as best as possible
what the costs associated with aged care are.
With awareness and preplanning you can maintain control over
the process, have access to the financial resources to pay for care and avoid
nasty shocks which can occur.
Step One: Plan Ahead
Families are often reluctant to talk about aged care and its
implications both financially and emotionally. The result is action is only
taken when a crisis arises. This leads to limitations being placed on time
needed to evaluate options and a sub optimal decision may be made, resulting in
family arguments and conflicts at a time when clear thinking is required.
What to do:
Draw a family tree and identify family
responsibilities and who will be involved in important decisions
Have family meetings to discuss preferences and
expectations
Go to the My Aged Care website
http://www.myagedcare.gov.au/
to find out more about what options are out there. This site also includes a
fee estimator which can assist is costing the options you may have
Consult a specialist financial adviser in this
area of speciality
Step Two: Understand
the Fee Structure
Depending on the family member’s financial assets and
income, the level and range of fees payable can be surprisingly high.
Planning early on can help you focus on how to fund the fees
to provide you with the best support – this may not necessarily be the cheapest
option available.
What to do:
With the help of the My Aged Care website and/or the
assistance of a specialist adviser gain an understanding of the range of fees,
including:
Paying for the accommodation. Most in care
accommodation will require a lump sum deposit, called a refundable
accommodation deposit. The level of this fee will depend on your level of
assets but there is a minimum level of assets that you can be left with. Please
note that this refundable accommodation deposit is not “lost” and is refundable
if the resident leaves the accommodation either voluntarily or on death. There
are options to pay this deposit bond in instalments but there will be an
“interest” charge on the outstanding deposit bond balance. The level of the
refundable accommodation deposit is subject to negotiation between the service
provider and the potential resident. This could be over $500000 for an
individual or over the $1m mark for a couple as a worse case scenario,
depending on assets held. The ability to negotiate will depend upon the
availability of accommodation and the preferences of the resident.
Further there are daily accommodation payments which generally comprise two
parts:
A daily basic fee – which is the same for all
A daily means tested fee – which can increase
depending on your financial position but are subject to an annual cap as well
as a lifetime cap. Once these caps are reached, the daily fee drops back to the
basic daily fee only. Up to this point, both the means tested and daily care
fees are payable
Therefore financial provision
needs to be made not only for the refundable deposit bond but also for both the
basic daily fee and the daily means tested fee.
The daily fees above will cover basic living
expenses such as food, electricity, cleaning and laundry services whilst
nursing assistance is subsidised to the provider by the government.
However, any luxury, lifestyle and other additional items will need to be paid
for by the resident on a user pays basis. This would extend to pharmaceutical,
medical and other services such as hairdressing, clothing and treats.
In many organisations, only a bed and chest of drawers etc are provided. You
may also need to purchase an appropriate chair, television and other items to
provide the lifestyle that is desired.
Therefore, cost of these items need to be provided for as well.
Step Three:
Structuring Finances
Accommodation costs are published on the My Aged Care
website.
If assets and income can be reduced enough to become a low
means resident before the move, the government may subsidise the accommodation
and regulate what the residents contribution is.
This may reduce the accommodation cost but may not always be
the best result for the resident. Choice and control of accommodation may well
be lost. As a result, the resident may not be offered a position at their place
of choice, but rather a place many kilometres from “home”. This may result in
unhappiness, distress and depression.
Many accommodation places have places “reserved” for high
fee paying residents such that having the funds and paying the price results in
the accommodation of choice being offered, with a much better result
emotionally for the resident. Don’t forget this as it is more valuable that the
resident is happy than money saved!
What to do:
Be aware that a home owner will generally not
qualify as low means unless their spouse (or other protected person) will
continue to live in that home
If a resident wants to enter under the low means
rules, unless planning has been undertaken at least five years earlier, there
are not many strategies to reduce assets. Note that assets transferred/gifted
within five years of entry may still be treated as assets under the gifting/deprivation rules.
This why consulting a specialist aged care
financial adviser early is recommended
Gifting/transferring of assets may incur stamp duty and capital
gains tax – be aware of this before any action is taken.
Step Four: Ensure
Wills and Powers of Attorney are set up
Dementia is a leading cause for the need for aged care
services. It is very important for Wills to be reviewed and updated as
necessary and appropriate Powers of Attorney executed whilst the resident has
legal capacity.
Once legal capacity is lost, a Will cannot be renewed or
amended. Further, it will be necessary to go to the Guardianship Tribunal to
set up Powers of Attorney in these circumstances.
In conclusion, careful planning will ensure that the
transition to aged care will be a relatively smooth and stress free process.