The 5 key questions on aged care

04 Dec 2018

If you are considering aged care for someone close to you, there are five questions you need answered to ensure the best care at the most reasonable cost.

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 we can help you navigate through them. 

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 Care Packages and Respite Care Services.

If it appears that independent living is too much of a challenge then they may recommend residential aged care. All facilities provide assistance with daily living needs, such as meals, laundry and cleaning as well as a degree of nursing care. However not all facilities can offer more intensive support for a higher level of care, including full time nursing care. The ACAT assessment will determine which level of care you need to look for so you can then decide on a facility. It is important to take a look first hand, to get a feeling for the standard of care available, any extra services and to start comparing the pros and cons of different aged care homes. 

Question 2 – What costs are involved?

The costs of residential care as being the most confronting aspect for the uninitiated. Whilst facilities are not government run, the cost of care is partly funded by the government and there are still significant costs to residents.

For instance, all residents will pay a standard resident contribution. In addition there are means tested care fees and residents are also required to contribute toward accommodation costs based on their level of assets and income.

Permanent Residential facilities now use the same structures to calculate fees, however total fees will vary depending on care and any extras that are agreed. All require a form of accommodation payment plus various ongoing care fees.

Resident's assets and income will be assessed by Centrelink to determine the level of fee and the degree of subsidy made by the government. 

Whilst it is not compulsory to undergo a means assessment by Centrelink, if you choose not to do this, then you can expect to pay the maximum, with no government subsidies. 

You can of course enter a nursing home with ACAT assessment, but waive the Centrelink assessments – however this may mean that no Government subsidies are forthcoming.

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 however, 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 aged care purposes and this may serve to reduce the contribution to accommodation costs and the means tested care fee 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; it requires a careful analysis of the resident's other assets and income. This is one area where we are 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 proceeds from the sale of the home may 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 accommodation costs. Again, there are no simple answers here; it will depend on individual circumstances. The age 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 and an understanding of how all the factors interrelate.

Don’t go it alone

Call an RI Financial Adviser who can assist you with any questions you have about your personal situation. You can also find more information on the website – www.riadvice.com.au 

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 recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.