What you absolutely need to know about your move into aged care

Aged Care Financial Advice


What you absolutely need to know about your move into aged care

Aged Care Advisor Luke Andrews has more than 12 years’ experience in helping people transition into aged care accommodation. In this article he draws on his deep knowledge to answer seven key questions he is often asked about a move into aged care.

1. Do I have to sell my house before entering permanent residential aged care?

When you sign a residential care agreement you are agreeing to room price and an additional service fee if applicable, all other fees are charges are determined by the Government.

If you do not provide a refundable accommodation deposit you will be asked to pay a daily accommodation payment from day one.

You then have 28 days to inform the facility how you intend to pay for your room, and if you elect to pay a deposit they expect to receive this within 6 months unless otherwise informed by the person or their family.

What this means is that you can get the care you require and still have time to arrange your finances with the help of an aged care financial specialist.

2. What if I don’t pay the RAD within 6 months? Can they kick me out?

Residential aged care is governed by the federal Aged Care Act (1997) and this provides security of tenure to all residents, irrespective of whether they have paid their account or not. This is why most aged care facilities will require that a family member acts as a guarantor to the payment of the fees, or a caveat is raised on the person’s property by the aged care provider.

Under the Act an aged care facility can only ask someone to leave if they can no longer care for them or they are a danger to themselves or others.

Aged care facilities have “ageing in place” meaning they have the ability to care for people until they are palliative. Usually, the point at which they can no longer care for someone arises where there are behavioral issues that require psychogeriatric intervention.

3. I saw on the news that people lost their accommodation deposit at a facility in Melbourne. If the facility goes bankrupt I will lose my refundable accommodation deposit?

The facility in Melbourne where people lost their room deposits was a supported residential service which is not regulated by the federal Aged Care Act (1997).

In facilities regulated by the federal Aged Care Act (1997), the refundable accommodation deposit is federal government guaranteed and repayable to a person or their Estate within 14 days of leaving. Aged care facilities are financially audited by the Government each year and must account for the deposits they hold.

4. What if I don’t like it, can I leave?

A person can leave permanent residential aged care by giving 14 days written notice to the facility and they will be charged care fees for these 14 days, and any refundable accommodation deposit refunded to them.

Furthermore, most facilities provide up to 52 days of social leave per year for holidays or visiting family.

Whilst reassuring that an easy exit exists if required, it is always worth having a conversation with facility management before executing this option as often care needs/expectations are mis-understood on both sides and a resident may have access to more care options within the facility than they realise.

5. Why can’t I use my full respite care allocation prior to becoming a permanent resident to save money?

Respite care is designed to give a person’s carer a break. The Government funds up to 63 days of respite care per financial year per eligible person.

On respite care a person pays just the daily care fee and additional service fee if applicable, and the aged care facility receives either a low-care or high-care respite supplement from the Government to cover the cost of the room and nursing care.

An aged care facility, depending on its size, also has a quota of respite days it can offer, which is why they often cannot allow someone to use their full 63-day allotment at once, particularly if there is an intention or need for permanent care.

From a care perspective, if there is an intention to become a permanent resident, it is often not in a person’s best interests to remain on respite for an extended period. This is because when a person becomes a permanent resident, the aged care facility must prepare a detailed Medicare care plan for the person including any allied health needs such as physio or podiatry, and this can be subsidised by the Government. Therefore, by becoming a permanent resident a person gets access to more individualised care which will benefit their overall health.

6. What if I have too many assets, will I get any support from the Government in residential aged care?

A person’s cost of clinical care is measured on a Medicare scale which reaches a maximum of approximately $260 per day, with most people being over $100 per day in terms of care cost.

A person’s means-tested care fee is their contribution towards their cost of care based upon their level of assets and income (means) and cannot be greater than their cost of care. This means-tested care fee is capped at an annual amount of $29,399.40, or an average of $80.55 per day during one year in care. Therefore, even someone paying their full cost of care daily due to their significant means will receive a subsidy equivalent to the difference between their cost of care as determined by Medicare and $80.55 per day over a full 12 month stay in care.

Furthermore, there is a lifetime cap for means-tested care fee contribution that would see someone who reaches the annual cap ceasing to pay a contribution to their clinical care after approximately 2.5 years in care, at which point their clinical care needs are fully subsidised by the Government which could cost up to $260 per day.

7. Will I pay less in aged care if I transfer assets to my children shortly before I enter?

Upon going into aged care, a person’s means are assessed by Services Australia to see if they are eligible for any subsidy for their room or care costs. Under the rules applied by Services Australia an individual/couple is entitled to gift up to $10,000 per financial year and no more than $30,000 over a rolling five-year period, with any amounts greater than this continuing to be treated as a financial asset by Services Australia and form part of the aged care assets and income assessment.

Furthermore, gifting of assets may deprive people of financial resource that they actually need to cover aged care costs, incur costs upon transfer (i.e. capital gains tax and stamp duty), and in the case of a family home result in an asset which is already favorably treated by Services Australia immediately becoming an assessable asset for both the Age pension and aged care cost determination placing the aged care entrant in a worse position.

There is always a way to be financially viable in residential aged care and getting the right specialised aged care financial advice is the first step towards this. Our team of experts are independent of the government and aged care facilities. They understand your concerns and have significant experience in working with people entering care and their families to provide smarter aged care solutions. To find out more about how we can assist you to find the best aged care outcome, contact your advisor.

This information is general in nature and is provided by Partners Wealth Group. 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.