When it comes time to consider aged care for our loved ones, the process can feel daunting and emotionally charged. Yet, this important phase of life also offers an opportunity to demonstrate our love and commitment to their well-being and dignity. Planning for aged care early can significantly reduce stress and confusion, allowing families to make informed, thoughtful decisions together.

Most people don’t look into aged care options until there is an immediate need. Common triggers are usually sudden health incidents, including falls, strokes, or the progression of chronic diseases, that demand an urgent request for aged care. These events can swiftly change an individual’s ability to live independently, even affecting their ability to communicate their desires and concerns with you.

Early discussions about potential aged care needs prepare everyone involved, ensuring that the transition can be as smooth and dignified as possible.

Embracing early planning helps families explore all available options, understand the financial implications, and establish the necessary legal and medical frameworks in a calm and considered manner. This proactive approach ensures that when aged care becomes necessary, the focus can remain on the well-being and comfort of the loved one, supported by well-thought-out plans that reflect their needs and wishes.

This guide is designed to support you through these decisions, providing clarity and comfort as you plan for the next steps.

Accessing Residential Aged Care

Accessing residential aged care typically starts with an assessment by the Aged Care Assessment Team (ACAT). This team evaluates the care needs of the individual and determines eligibility for government-subsidised aged care services. This step is crucial for planning, as it helps outline the level of care required and the type of facilities that would be most appropriate.

To be eligible for government-subsidised residential aged care in Australia, individuals must first enrol with the My Aged Care service. This can be done by completing an application either online via the My Aged Care website or by contacting My Aged Care directly through their phone service. Following a successful application, an in-person assessment will be carried out by the Aged Care Assessment Team (ACAT). During this process, ACAT may request consent to discuss the individual’s health history with their doctor to better understand their needs.

While awaiting the results of the ACAT assessment, which typically takes between two to six weeks, individuals are encouraged to begin researching potential aged care facilities. The My Aged Care website offers a helpful tool called “Find a provider” that assists in locating nearby facilities that meet specific care requirements. This tool provides details about the services each facility offers and the maximum room prices.

Residential Respite

Residential respite care takes place in an aged care home.  It is best suited to people who need support for most tasks and can be for a few days through to a few weeks at a time.  At times, this could be used to have someone experience their new residency before making the financial commitment to be a permanent resident.  Residential respite is available for up to 63 days of subsidised care in a financial year.  This includes both planned and emergency residential respite care.

Accommodation Options and Costs

In Australia, residential aged care facilities offer various payment options to cater to the diverse financial situations of residents and their families. Understanding these options is crucial for effective financial planning and ensuring that the chosen type of care is sustainable over the long term.

Accommodation Payment Options

The costs associated with aged care accommodation can have a substantial impact on personal finances. Aged care residents have 28 days after entry to decide how to pay for their accommodation.

It is vital to understand all associated costs, including potential increases in fees and the impact of inflation on daily payments. Planning for these costs ensures that residents can maintain their chosen level of care without compromising their financial security or quality of life.

  • Refundable Accommodation Deposits (RAD): This is a lump sum payment made to the aged care home. The RAD is fully refundable when the resident leaves the aged care home, minus any amounts agreed to be deducted for care or other services. The amount of the RAD can vary significantly between facilities and locations, depending on the type of room and the amenities offered.
  • Daily Accommodation Payments (DAP): Instead of paying a lump sum, residents can choose to make periodic payments, similar to paying rent. The DAP is calculated by applying the government-prescribed interest rate to the unpaid RAD balance. This rate is set by the government and can change over time. The DAP can be paid periodically (e.g., monthly) and is non-refundable.
  • Combinations of RAD and DAP: Residents may also choose to pay a portion of the accommodation cost as a RAD and cover the remainder as a DAP. This combination can be adjusted to suit the resident’s financial situation, allowing for greater flexibility in managing cash flow and investments.

Understanding these costs helps families avoid unexpected financial burdens and facilitates better financial management, preserving the resident’s estate for future needs or for inheritance purposes.

Funding Aged Care

The costs for residential aged care are separated into accommodation payments and ongoing care fees. Both of these are determined by the facility as well as the client’s means at entry into residential aged care.

Funding aged care can be managed through various strategies, including selling assets, dipping into savings, or relying on family contributions. Each method requires careful planning to ensure that financial needs are met without compromising care quality or personal comfort.

Common strategies include:

  • Using savings or liquid assets: Directly using personal savings or liquidating assets to fund RAD or cover ongoing DAP.
  • Selling the family home: This can provide a significant sum to cover the RAD, but it is essential to consider the emotional and financial implications of this sale.
  • Renting out the family home: This strategy can generate income that can be used to cover DAP, helping to maintain the family asset while supporting aged care costs.

The decision to keep or sell the former home is one of the most significant financial and emotional decisions when moving into aged care. Keeping the home might provide emotional security and a sense of continuity, as well as potential rental income. However, selling the home may release substantial capital to fund aged care services and reduce the financial burden on the family. This decision impacts not only financial planning but also Centrelink assessments and pension eligibility.

Is an Aged Care Deposit Necessary?

When entering residential aged care, there is an option to pay a Refundable Accommodation Deposit (RAD). Paying a RAD can reduce ongoing daily fees, as it secures the accommodation in the facility. This lump sum is government-guaranteed and refunded when the resident leaves the facility, minus any agreed deductions. Deciding whether to pay a RAD depends on your available capital and the potential investment returns from alternative uses of these funds.

Tax and Legal Implications

Dealing with the tax and legal implications of aged care is a complex area that includes potential tax liabilities from selling assets or generating rental income. Legal considerations need to be made, especially around.

  • Minimising Tax: understanding the implications of selling assets or receiving rental income.
  • Legal Considerations: Ensuring documents like power of attorney and wills are up-to-date is essential for managing aged care arrangements effectively.

Centrelink and Financial Considerations

When entering residential aged care, assessable assets, including the proceeds from the sale of a home, influence the calculation of the means-tested care fee and accommodation payments. Higher assets can result in higher fees.

There are also possible impacts on pension payments and Centrelink assessments for sales and the financial implications of renting out the family home. This is a complex and highly confusing area that can trap potential residents and incorrectly sway decisions.

In terms of aged care assessments, the value of a former home is not considered if a spouse or dependent is living in it. If no protected person resides in the home, its value is included in your assessment but only up to a maximum limit known as the home exemption cap. Additionally, both for Centrelink and aged care assessments, any rental income generated from the property is taken into account immediately.

There are ways around these implications if you know where to look. This is where a financial adviser can assist by offering advice on Centrelink or DVA benefits that will be impacted and recommending strategies that maximise entitlements.

Will I Lose My Pension?

Many families worry about the impact of aged care costs on pension eligibility. The treatment of income and assets for pension purposes can be complex, especially with changes in how assets like the family home are used or disposed of. It’s essential to consult with a financial adviser or use resources like the Centrelink website to understand how these decisions might affect pension benefits.

Aged Care Friendly Investments

Investing in aged Care friendly options can help manage and potentially reduce the ongoing fees associated with aged care. These investments are typically lower risk and focus on generating stable, predictable returns that can help cover periodic expenses.

Careful planning and investment strategies can also minimise tax liabilities from sources like rental income or capital gains from the sale of assets. Understanding which investments offer tax efficiencies is an important part of maximising the funds available for aged care.

How Financial Advisers Can Help

Financial advisers play an invaluable role in planning and managing aged care costs. They provide expertise in navigating the complex landscape of aged care financing, offering tailored advice that can protect assets and ensure the affordability of care options.

Financial advisers can add value by:

  • Navigating Complex Decisions: Advisers can help assess whether to keep or sell the family home, how to handle investments, and the best ways to structure payments for aged care.
  • Reducing Costs and Fees: Expert advice on reducing ongoing fees and minimising tax liabilities.
  • Tailored Financial Strategies: Advisers provide personalised strategies that can protect assets while ensuring the affordability of aged care options.
  • Preserving estate value: Advisers provide financial strategies to ensure cash flow requirements are met to cover ongoing costs for residential aged care with a focus on preserving assets which will one day be paid to beneficiaries.

It can be difficult to put emotion aside and make the important decisions needed around sending loved ones into aged care, especially if the decision is sudden. As well as the well-being of your loved ones, there are considerable financial implications to navigate. Early planning and professional advice can help remove the anxiety and uncertainty of securing the best care with the most favourable financial outcomes. By starting discussions about aged care needs early, families can ensure that their loved ones receive the care they deserve without undue financial stress.