Entry to aged care can be a difficult time for everyone involved – not only for the new resident but for their loved ones. On top of the emotional difficulties surrounding moving from home or hospital to permanent residency, there is the financial stress.
There have been many changes to the aged care system over the years and these have involved terms and concepts that most residents and their loved ones will be hearing for the first time such as RAD, DAP, basic care fee, means tested fee, extra service fee etc.
Prosperity can help manage the financial stress involved at this time. Whilst some costs are a given, proper financial structuring and making smart decisions about the former home for example can help to reduce the resident contribution toward care costs and increase the residents eligibility to age pension and other Centrelink benefits. The following is a recent example of how we assisted a client.
Hannah is an 83 year old widow who owns her own home and has suffered some health problems affecting her ability to live at home unassisted. She has been using Home Care Services but her and her family understand that this was no longer viable.
Hannah received an ACAT (Aged Care Assessment) giving her access to the aged care system. Hannah owned her home, had $100,000 in the bank and received the maximum age pension. The advertised Refundable Accommodation Deposit (RAD) for the facility she was interested in was $550,000.
Prosperity advised on a range of options from, retaining and renting the home, selling the home and paying the RAD upfront or instalments. Prosperity also advised on options of sensible structuring using special annuities that resulted in more favorable means testing for both the age pension and the means tested care fee. Hannah’s base case to rent the property would have meant a lower pension and higher means tested care fee. In addition, the RAD (at that time) attracted an installment rate of 5.77%pa.
Following Prosperity’s advice, Hannah was able to:
- Pay the RAD in full (negating a cost of 5.77%pa on any unpaid balance)
- Access an additional $5,700 in age pension in year one (growing to an additional $19,000 by year four)
- Reduce taxation liability by some $6,000 per annum; and
- Improve cash flow by $24,000 per annum in year one (growing to a $50,000 per annum improvement by year four)
A word of warning though, don’t wait till the last moment to seek advice; considering your options well in advance can reduce a lot of the stress felt at the time of entry.
To find out how we can help you or your loved ones at this stressful time, contact Gavin Fernando on 1300 795 515 or your principal adviser.
This example 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, Hillross Financial Services Limited 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 investments. Please contact us if you want more information.
The example is illustrative only and is not an estimate of the benefits you will receive or fees and costs you will incur.
This example is based on the following assumptions:
(a) Hannah is a post 30 June 2014 entrant to Residential Care
(b) Hannah’s advertised RAD was paid in full from the proceeds of the sale of her home
(c) Hannah used a CARE Annuity to further manage aged care costs and age pension benefits
Prosperity Wealth Advisers Pty Ltd (ABN 32 141 396 376), Authorised Representative and Credit Representative of Hillross Financial Services Ltd, Australian Financial Services Licensee and Australian Credit Licensee 232 706.