Aged care tips and traps
It is estimated that by 2051, more than 25% of the population will be aged over 651, whilst the number of people over 85 is expected to more than quadruple to approximately 1.8 million2. The likelihood that you will have to place a parent or relative into an aged care facility is remarkably high. You could even be considering it as part of your own retirement.
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.
- 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.
- Avoid selling the family home before seeking 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, seek advice prior to entering into an aged care facility agreement.