By Peter Burke
“Aged care” – it seems this phrase is one that is a cause of serious stress and an assumption of many unanswered questions and decisions for many, both those who may be in need and those who are required to assist family members, with this huge life decision.
- What should we be doing?
- Where should we be considering making an approach?
- What is the process we go through?
- What might the costs be?
Aged Care is an area of planning that we, as a Financial Planning Business, are finding more and more of our attention being drawn to. The Aged Care planning can be for clients who are either needing to assist their parents into care or clients needing to consider putting their partner into age care, or the individual themselves needing guidance on this personal decision.
As our client base ages, as the parents of our client’s age, this is an increasingly frequent planning matter that we need to address with and for our clients.
What should we be doing? Where should we be considering making an approach?
These are very personal and emotionally charged questions with no easy answers.
However, if you have the support and guidance of someone who can take away some of the financial and paperwork uncertainties, help give some clarity on what decisions you can take charge of and what can be outsourced confidently to the experts, then it leaves much more emotional strength and space to concentrate on the “what, where, and why” questions that only family members can make.
What is the process we go through? What might the costs be?
The paperwork required and the process of obtaining and working through this process can be quite daunting alone before even getting to the costings. This is certainly one of the key areas that financial planners such as ourselves can take a huge load off the shoulders of our client(s) who will be the decision makers.
The calculations of, and the various costs that are involved in Aged Care, can be a bit complex if it’s not something you are dealing with all the time.
Broadly, the Aged Care Fees can apply across three different areas.
- There is the basic daily fee, which for all people, no matter what your means, no matter what
your asset values will be simply about 75% of the single rate age pension. This at present
equates to approx. $50 per day for everyone, regardless of your asset and income values.
- The second is the means tested fee, which is a fixed calculation based on your assessable assets and income situation. If you request assistance from planners such as ourselves we can provide a fairly accurate estimate using calculators provided for this purpose by Dept of Human Services. This fee also has a lifetime cap which applies so a maximum lifetime total fee applies to all aged care residents.
- The third fee is the accommodation contribution. This can be funded in a number of different ways.
– as a lump sum, (Refundable Accommodation Deposit – RAD) an agreed lump sum amount that is fully refundable to the individual/family in the event that person leaves the home (of their own freewill or unfortunately passes away).
– As a periodic payment which means a monthly fee based on the value of the unpaid RAD at a government mandated set interest rate.
– As a part lump sum and part periodic payment (interest rate applies to the portion of the unpaid RAD)
Note that there are a number of implications of each of these options depending on how the individuals personal financial circumstances are situated. There are implications with any Age Pension payments depending on what you do with assessable assets and choices on how you fund the RAD, whether as a full lump sum, periodic payment or combination. Modelling on the choices/options can be done to ensure the best financial outcome for the individual (and partner as applicable).
In summary, there are a number of areas that need to be factored in and every single case is quite unique. Quality financial planning advice can certainly add value in providing people choices and information, to ultimately ensure the best overall financial situation, based on the individual circumstances in this quite complex area with lots of implications and variables.
– single or a member of a couple.?
– what your overall assets value might be?
– any Age Pension entitlements retained and maximized?
– ongoing estate planning and how this passes on to the partner or children (the beneficiaries
of the individual)
If you can give attention to all these questions and decisions with some early planning, in advance of Aged Care need, then often you can implement the right strategies and structures, to optimize the outcomes for all concerned.
Recommendation – sit down and discuss these very ‘important’ considerations and variables with a qualified professional, well in advance of the need for Aged Care. Start doing the necessary planning accordingly, well before it becomes an “urgent, important task”.
This blog contains information that is general in nature. It does not take into account the objectives,
financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
If you decide to purchase or vary a financial product, your financial adviser, AMP and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investment. Please contact us if you want more information.
PB Financial Solutions Pty Ltd – trading as Burke Britton Financial Partners & Securelife Financial Solutions ABN 67 097 381 523 is an authorised representative and credit representative of AMP Financial Planning Pty Limited, Australian Financial Services Licensee and Australian Credit Licensee ABN 89 051 208 327. Licence No: 232706