Aged care homes charge a range of fees to cover care, accommodation costs and living expenses. These can vary enormously between facilities and from resident to resident. The following are the four basic fees associated with aged care:

• Basic daily fees – Residents in aged care can be asked to pay a basic daily fee as a contribution towards accommodation costs and living expenses. This includes items such as meals and refreshments, cleaning, laundry, heating and cooling. The basic daily fee for all permanent residents who enter an aged care home is 85 per cent of the annual single basic age pension.

• Contribution towards accommodation– There are two types of accommodation charges which may apply:

1 Accommodation contribution – For clients who have some assets, they will be required to make a contribution to the cost of maintaining the aged care accommodation.  This amount will be variable depending on the operation of the means testing arrangements, but will never exceed a certain figure (currently $53.84 per day). 
2 Accommodation payment – Residents of reasonable means (where their means tested amount exceeds the $53.84 per day figure) will be required to pay the accommodation provider’s fixed costs, which are advertised on MyAgedCare.gov.au Figures listed on this site are set by each aged care facility.

Importantly, the client has full control over whether they pay their accommodation costs by a lump sum (known as a Refundable Accommodation Contribution/Deposit), via daily payments (knows as Daily Accommodation Contribution/Payment) or a combination thereof. An aged care provider cannot force the client to make their accommodation payments in any specific way.

• Means-tested care fee – Residents in permanent aged care may be asked to pay a fee in addition to the basic daily fee. The amount payable depends on the residents’ level of assets, their income and the level of care required. This contributes towards the cost of care.  If a client is paying an Accommodation Contribution, they will not be required to pay a means-tested care fee.

• Extra service fees – Some aged care facilities provide extra services which can be offered across the whole facility or to a designated part. Extra service means that the facility will provide the residents with a higher standard of accommodation and/or services. Examples of extra services could be a bigger room, a wider choice of meals or wine with meals. This does not mean that the resident will get a higher level of care, as all homes have to provide the same level of care.

Renting out the family home

Retaining and renting the family home could provide an exemption for social security purposes, provided:
1. the resident is paying a Daily Accommodation Contribution/Payment (even if they have also partially paid a lump sum)
2. it is rented out.

If these criteria are satisfied, the asset value of the family home and the income (rent) will be exempt from age pension assessment.  However, the value of the property will remain assessable up to a cap (currently $157,987.20) for the calculation of aged care fees.  The rental income will also be included for aged care income testing if the person moved into care after 1 January 2016, whilst residents in care before this date benefit from the rental income being excluded in calculation of their aged care costs.

It should be noted the current Government has shown an intention to remove this exemption from social security means testing – however no legislation has been introduced to implement this change at the time of writing.

When retaining and renting the family home, it is important to consider the income tax impact (as the rental income is assessable for tax purposes), the capital gains implications and whether renovations are required.

Get advice

Seeking advice from your financial planner or an aged care specialist will ensure that you can make the right financial decisions. This could make a difference to your or a loved one’s overall quality of life by being able to afford the standard of care that is required. Call us now on 02 4926 2300

Source: IOOF

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If the need for residential aged care is nearing you or a loved one, following these five steps will help you make a smoother transition.

1. Get your eligibility assessed

Before you can enter an aged care facility and receive Government support, your health situation must be assessed by the Aged Care Assessment Team (ACAT). The assessors are generally health professionals who specialise in aged care assessment.

This is a free service that can be done at home, in a health centre or hospital. The purpose is to determine whether you are eligible to move into residential aged care, or can access a range of care services that would enable you to stay in your home longer.

2. Find a suitable aged care facility

Once Aged Care Assessment Team has determined your eligibility for residential aged care and the care services you may need, it’s a good idea to visit a few facilities.

Remember each facility is different and not all aged care facilities will be able to meet your care needs.

3. Work out the cost

While the Government provides some funding for residential aged care facilities, those who can afford it are expected to contribute to the cost of their care.

The four different fees you may be asked to pay include:

• an accommodation payment – for your accommodation in the aged care facility, which may be paid as either a lump sum, regular instalments or a combination of lump sum and instalments
• a basic daily fee – which will usually be payable by all residents and is a contribution towards daily living costs, such as nursing, personal care and meals
• a means-tested care fee – which is an additional contribution towards the cost of care that you may need to pay depending on the assessment of your income and assets, and
• an extra services fee – which may be payable if you choose a higher standard of accommodation or additional services and it varies from place to place.

4. Seek financial advice

Moving into residential aged care can be financially challenging. However, obtaining financial advice can help reduce a lot of the stress by helping you to:

• determine which fees may be payable
• implement strategies that could reduce your care costs and/or increase social security entitlements, and
• ascertain whether care at your preferred facility(s) is affordable for you.

In conjunction with a solicitor, your financial planner can also help to ensure your estate planning affairs are addressed as you will need to consider:

• selling, renting, retaining or transferring ownership of your family home
• reviewing your enduring power of attorney
• reviewing your Will (including the benefits of including provisions in your Will that establish a testamentary trust upon your death), and
• reviewing your superannuation death benefit nominations.

5. Apply for an aged care facility

Once you’ve decided the type of care you want and can afford, and your estate planning affairs are in order, it’s time to apply. It may be a good idea to lodge an application with a few places and ask to go on the ‘waitlist’ in case your preferred aged care facility is not available.

If you are offered a place, you must be given a copy of the accommodation agreement before you move in. This agreement sets out the key terms and conditions and it should be reviewed by a legal professional. You must sign the agreement and decide how you will make the accommodation payment within 28 days of entering the facility. 

Source: MLC

Speak to your financial planner to discuss your aged care options.
Call (02) 4926 2300 or email us. 

To discuss your aged care options please do not hesitate to call us here at Leenane Templeton to speak to a professional and expert financial planner. 

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Add to this the reality that many of us are going to outlive our savings, and the age we qualify for the Government pension is rising, then it’s no surprise that aged care and estate planning are hot topics for government, financial advisers, and families alike.

So what are some important things to consider when looking to plan your life, or that of a loved one, after retirement?

Five core issues

1. The costs.

Establish entry fees and bonds and ongoing costs of nursing homes and hostels. For residential care make sure you understand the costs are for things like daily care fees, and income-tested fees.

2. The family home.

Consider if someone will continue to live there, or should it be sold or rented out? You might consider options such as a reverse mortgage.

3. Social security.

Find out how to maximise your age pension entitlement by structuring your assets in the most effective way.

4. Tax.

Look at what special tax offsets may be available when living in residential aged care.

5. Estate planning.

Have you or your loved ones sorted out a power of attorney or enduring guardianship?

Government help

In July 2014, the Australian Government launched the Let’s talk about changes to aged care campaign (myagedcare.com.au). The changes included:

• greater support to stay independent and in your own home and community with more home care packages to meet your needs
• older people being asked to contribute to the costs of care, if they could afford to do so
• increased flexibility in ways to pay for accommodation in an aged care home
• Centrelink providing income testing for people receiving home care, and both income and asset testing for people receiving residential care.

Estate planning

A huge part of aged care planning is estate planning. At its most basic, estate planning is about working through what you want to do with your assets when you die. It’s much more than just a Will. Effective estate planning is about protecting your assets and empowering you with the information and knowledge you need to make informed, conscious choices so that your family is not left stranded or your assets eroded or exposed to systems, processes and challenges that you may not be aware of or have even considered.

Financial planning

Whatever your preferred choices are for aged care there is a need for preparation and sound financial planning.

Source: BT Financial, October 2014

Call Leenane Templeton on (02) 4926 2300 or email us.

Our team of expert financial planners are at hand to assist with your financial position ahead of retirement. Living Long – Living Well.

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It is important to note existing residents will be grandfathered under the current rules and new rules will only apply to individuals who enter residential aged care on or after 1 July 2014. Major changes are summarised in the table below.

Here are three guiding principles to help navigate the changes.

Principle #1 – aged care is about more than numbers

Aged care is not a purely technical prospect. First and foremost it is an emotional dilemma. In our experience, when advising families, it is rare that everyone agrees on everything—from the standard of the facility through to geographic location or the type of care.

In terms of financial strategies, there is no ‘one-size-fits-all’ solution. You will need to compare multiple strategies before reaching a decision. One of the difficulties we have also found is that decisions made by family members can sometimes be in their own best interest and have little to do with what’s best for the prospective resident. It can often take time and the intervention of professional advice to get the best result for both the family members and the prospective resident.

Principle #2 – get good advice

It is important to find a professional financial planner that is up to date regarding aged care and Centrelink rules. This should include an understanding of aged care and social security regulations, as well as entitlements for veterans and the overlay of taxation, superannuation, and retirement income streams.

Principle #3 – for better or worse, make the most of the rules

As we approach 30 June 2014, we are often asked whether residents will be better off under the new rules or whether they should bring forward plans to move into aged care.

In modelling the application of the income-tested fee under the current rules and the application of the means-tested fee post-30 June 2014, the cost of care will generally be more expensive under the new regime. The annual and lifetime capping of the means tested fee will make it more affordable for some people, particularly those who are generally healthier and have greater personal wealth.

The set of financial strategies available under the new rules also presents some opportunity. By way of example, since only a portion of the principal residence will be assessed (if not occupied by a protected person), there may be more reason than under the current regime to retain the principal residence.

Source: Australian Unity, 2014
Craig Meldrum, Head of Financial Advice at Australian Unity.

Our expert team of financial planners are at hand to help with any aged care questions you may have.
Call (02) 4926 2300 or email us.

Disclaimer

To discuss these aged care reforms as well as any other aged care queries you may have, please do not hesitate to contact the team at Leenane Templeton.

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However, this can be a very emotional time, and there’s a lot to consider. In fact, you’re required to make sometimes difficult and complex financial decisions which can affect the level of aged care fees to be paid, the pension payments that you or your loved one receive, the timing of any sale of the family home and more. It’s important to understand all of the fees associated with aged care and it can help to speak to a financial planner about how you or your loved one will finance their move into aged care.

Aged care options

The type of costs you’ll pay will depend on the type of home you move into. If you have simple needs, you’ll probably need low level care (provided by hostels). Low level care homes offer accommodation services such as meals, laundry, additional personal care and some nursing care if needed.

If you need assistance with most activities of daily living, it’s more likely that you’ll need high level care (i.e. a residential aged care facility). These types of homes provide 24 hour nursing care and accommodation. They generally provide meals, toiletries, mobility aids and most medical supplies.

Your care needs will be determined by a member of an Aged Care Assessment Team (ACAT). In fact, you can’t enter a home without being assessed and approved by an ACAT member.

Aged Care Fees and Accommodation bond costs

If you are entering a low level care home or a high level care home with extra services, you’ll be asked to pay an upfront cost called an accommodation bond.

The amount of the accommodation bond, generally a one-off lump sum, is negotiated with the home at the time of entry, and will vary from facility to facility. Unless you have a large amount of assets you can use to pay for the bond, your next option might be to sell the family home. However, it is important to realise that there can be financial advantages to keeping the home. Your financial planner can help you make the right financial decision and help you to understand how you will afford your ongoing costs.

There are several types of ongoing costs you might pay, usually depending on the type of home you enter and the services it offers.

For a high level home without extra services, you’ll be asked to pay an accommodation charge in lieu of an accommodation bond. Your charge will be negotiated with the home at the time of entry. This is calculated daily and is set upon entry into the home, so it will not change while you’re a resident.

A basic daily fee is another ongoing cost payable by all residents for the costs of daily living such as meals, cleaning, laundry and heating. For someone entering care today, the basic daily fee is $44.54 per day (this is indexed twice a year in line with the indexation increases to the Age/Service Pension).

You may also be asked to pay an incometested fee on top of the basic daily fee. This fee amount is determined by your assessable income and should not be more than the cost of your care.

To give you more flexibility and choice, a number of low and high level care facilities also offer extra services for an additional fee. These services may include a higher standard of accommodation, food and other services.

Making the right financial decisions

If you have sold your home and have an amount of cash remaining after paying an accommodation bond, or if you have other investible assets, there are ways to structure your investments to minimise your ongoing aged care fees and get more from the Age/Service Pension. There are also special investments just for people in aged care, which can deliver a secure income stream, improve pension payments, give access to the Seniors Card and reduce ongoing aged care fees.

The financial aspects to entering an aged care home can be complex. It is wise to always seek professional advice before making any commitments. If you do wish to discuss this further please contact our friendly team at Leenane Templeton.

Source: Challenger, June 2013

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It can be difficult to plan, either financially or emotionally, for the move into an aged care facility. When trying to choose the best care, many practical issues arise and decisions need to be made.

Seeking financial advice during this time can ensure that the decisions that you and your family make will be the right decisions. The following key tips and traps should assist you and give you confidence when facing the aged care challenge.

Key tips

• Determine whether you or your loved one are eligible to enter into an aged care facility and what level of care will be needed (such as high level care – also known as a nursing home). This is established via assessment by an aged care assessment team.
• Gain an understanding of the aged care fees applicable to your aged care facility and whether you can purchase additional extra services.
• Take into account the impact that entering an aged care facility may have on your or your loved one’s financial situation and age pension entitlements.
• Read the booklet titled “5 steps to Entry into Residential Aged Care” which can be obtained from the Department of Health & Ageing. This booklet mainly focuses on the non-financial matters and issues that need to be considered (for example, what you should consider when choosing a nursing home).
• Ensure that you have sufficient cash-flow to fund the aged care fees and costs (for example ongoing maintenance of the former family home)
• Determine how long your money will last and create a plan with your financial adviser to improve this.
• Revise your estate plans and important legal documents (such as an enduring power of attorney) that have been granted to your immediate family, close relative or friend.
 

Key traps

• Avoid selling the family home before seeking financial advice.  Paying certain aged care fees and renting out the former home could deliver a better outcome. The overall benefits of not selling may include reduced aged care fees and increased age pension entitlements.
• When retaining and renting the former family home, it is important to consider the income tax impact (as the rental income is assessable for tax purposes), the capital gains implications and whether renovations are required.
• Avoid taking actions that could result in a loss of age pension and increased aged care costs (for example gifting assets outside Centrelink gifting rules).
• Remember to consider the impact that entering an aged care facility might have on your or your loved one’s financial estate, to be passed on to the next generation.
 

Start planning early as part of a retirement planning strategy. This will mean that you can effectively plan for this next phase of life. Most importantly, note that it is essential that you seek financial advice prior to entering into an aged care facility agreement.
 

Ensuring that you make the right decision will depend upon a multitude of factors and the decision can be complicated.  Speak to our financial adviser, who is an aged care specialist, to ensure that you can make the right financial decisions to optimise your situation and avoid the key traps.
 

1. Access Economics, 2001. Population Ageing and the Economy, research paper commissioned by the Commonwealth Department of Health and Aged Care, ACT.
2. Treasury’s Australia 2050: Future Challenges (2010 Intergenerational Report).

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