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The five key questions on aged care

If you are considering aged care for someone close to you, there are five questions you need answered to help you find the appropriate type of care at a 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 there is help available to navigate through them.

As a specialist in the field of aged care advice, many RI Advice financial advisers have helped 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,” one RI Advice financial adviser told us. “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 transitional and financial issues involved.”

“To try and help people gain some perspective and identify what the priorities should be, I focus on what I call the five key questions on aged care” they said.

Question 1 – what are the aged care options?

The degree of care needed is evaluated by an Aged Care Assessment Team (ACAT) or Aged Care Assessment Services (ACAS) in Victoria. 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 Social Services in the form of Commonwealth Home Support Programme, Home Care Packages and Respite Care Services.

If it appears that independent living is too much of a challenge then they may recommend receiving full time care in a residential aged care facility

Question 2 – what costs are involved?

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 towards an entry fee plus ongoing daily care fees.

“All Commonwealth subsidised residential aged care facilities use the same structure to calculate entry fees. You may be required to either pay the entry fee yourself (an accommodation payment) or contribute to the cost of the entry fee (an accommodation contribution) and the government meets some of the cost. Your income and assets will determine which one applies to you. Also you have an option to pay the entry fee as a lump sum (refundable accommodation deposit/contribution) or daily accommodation payments/contribution or a combination of the two, ” the financial adviser explained to use.

They went on to explain that residential aged care facilities also charge daily care fees on top of the entry fee. The basic daily care fee is generally payable by all residents, whereas the means tested care fee is based on the resident’s income and assets. “At the very least, the daily care fees will be a large proportion of the age pension, but they can be significantly higher depending on a person’s income and assets. Some facilities will also ask you to pay extra services fee on a compulsory basis or additional charges on a user pays opt-in basis. 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 financial adviser we consulted points out, however, that 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 entry fee payable to the aged care facility. If the home is left vacant and not lived in by an eligible person, then it is assessable but the amount that is counted is capped. 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 and the rules keep changing. 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 while considering the impacts of fees and 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 be assessed under both the income and assets test. Our financial adviser recommends caution in this regard. “It may well be possible to keep the home, rent it out and use the income from this to fund the entry fee paid at least partly as daily accommodation payments. By doing this, the value of the home will be exempt under the Age pension assets test but the rental income generated is assessed under the Age Pension income test. 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 maintained?

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 consider the cost and structure of fees, maintain access to any age pension entitlements, deal with the family home and consider other financial investments will all have an impact on what ongoing income can be generated. Our RI Advice financial adviser urged people dealing with aged care not to go it alone. “Analysing all these issues and structuring the most effective solution takes some skill to organise. I find that 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. I would strongly advise anyone in this situation to seek professional advice from a qualified financial planner to find the right answers to these five critical questions.” That’s great advice!

For more information it is recommended you talk to a professional financial adviser who can talk you through the options, impacts and opportunities relative to your situation.

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.

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