First published on August 1, 2017
Planning ahead for aged care for a parent and how to pay for it can be stressful, fraught with emotion and lead to misunderstandings. However, approaching the issue now while parents are healthy can avoid last minute scrambling if a serious health issue suddenly arises.
It is best for adult children to start a conversation with parents early because there are often big decisions to be made about how to fund care. The Australian Government subsidises aged care to make sure the costs are reasonable, however fees associated with aged care are extremely complex.
There are the costs of care, accommodation and if you have assets, there are means-tested fees as well. Means-tested fees are based on both your income and on your assets. The means-test treats assets differently to how the Age Pension Income and Assets Test treats assets like your family home.
To add to this, you can choose to pay for your accommodation (the Refundable Accommodation Deposit - RAD), as a lump sum or Daily Payment (DAP). The lump sum payment is government guaranteed and is fully refundable. The daily payments are like interest on a home mortgage, they are not refundable.
These fees can quickly add up and without planning may be difficult to afford. There is a yearly capped cost of care of around $26,000, but in some situations residents are required to pay this over a relatively short period which can cause cash flow problems.
Seeking early advice from an aged care advisor can increase your options. You may find ways to pay lower fees, reduce the means-tested fees and maximise Age Pension benefits. It may mean your parents will pay less to be in the aged care facility.
One option may include the sale of the family home to generate regular income while reducing assessable assets. If only one person from a couple needs to move into care, there are other strategies to consider. Unfortunately, because the mix of aged care fees, entitlements and limits are difficult to understand, many people do not take full advantage of the government assistance available to them.
While the options may seem overwhelming it is possible to tailor the level of care and how it is paid for to suit everyone. An aged care advisor may be able to help your parents access high quality health care while working to reducing daily costs, fees and maintain financial security for your parents.
Be prepared and get advice while the capacity of your loved ones still allows for it, call us on 1800 806 645 – we’ll introduce you to our colleagues at MyState Wealth Management for an obligation-free discussion. For more information visit mystate.com.au/wealth
Information is current as at 17 July 2017. This is general advice only, before making any decisions please speak with a MyState Wealth Management Financial Planner.