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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