Residential Aged Care – A Daunting Prospect?
By Demelza Lister
It can be a daunting prospect moving a loved one into a residential aged care facility and it’s one that we regularly share with clients as that time looms on the horizon.
There is usually a wild cycle of emotions to cope with:
- There is the feeling of guilt – Are they ready?
- Am I being selfish? Should I, could I, keep caring for him/her at home?
- Which follows to the logistics of where should they go? When?
- What will we do with the house, the furniture, the dog?
In addition to these emotional and logistical decisions, you also have to consider the financial aspects. The costs to enter an aged care facility can be very high and a number of factors must be considered including:
- The costs of firstly entering the facility
- The ongoing fees
- The effect on their social security benefits
- Taxation implications that may arise from selling assets to pay for entering a facility
- Choosing appropriate investments that are effective for tax and social security purposes
- Planning how these changes may affect their Estate Plan; and
- Simply understanding the payment options available to them and the implications of each.
The financial aspects of aged care are complex and require a solid understanding of how the rules impact on social security and the tax system. Most clients meet with us after the potential resident has had their health situation assessed by an aged care assessment team (ACAT) and we then help them understand the financial rules.
The cost components associated with new people entering and residing in an aged care facility can be summarised as follows:
1. Accommodation Payment
The accommodation payment can be a lump sum payment known as a Refundable Accommodation Deposit (RAD) or Refundable Accommodation Charge (RAC), depending on the value of your assets. Generally, the deposit is limited to a maximum of $550,000 and is fully refundable. Alternatively, if the resident can’t pay the lump sum, then they can pay a daily amount known as a Daily Accommodation Payment (DAP) or Daily Accommodation Charge (DAC). This can be an expensive option for some.
2. Basic Daily Fee
This fee is generally paid by all residents and covers the daily living costs including nursing, personal care and meals. The fee is calculated as 85% of the max. single age pension payment. The current rate to 19 September, 2018, is $50.16 per day. The fee is usually paid fortnightly or monthly in advance and is payable even if you are temporarily away from the facility.
3. Means Tested Fee
The Means Tested Fee is assessed on a combined income and assets test. The income test is assessed as 50% of your assessable income over an income free area of $26,764.40 pa (for singles) and $26,244.40 pa (per member of a couple). The assets test is calculated as the sum of 17.5% of assessable assets between $48,500 and $165,271.20; 1.0% of assessable assets between $165,271.20 and $398,813.60 and 2% of assessable assets over $398,813.60. This fee has a lifetime cap of $64,715.36 and once a resident has paid this amount over the years, they will no longer pay a means tested fee for any day, regardless of whether they change aged care facilities.
As mentioned, the financial rules are complex and most people only encounter them once or twice in a lifetime. We are performing these calculations on a regular basis and have skill and experience in completing the paperwork required by CentreLink to determine the means tested fee.
Should you require advice in this area please do not hesitate to contact Potts & Schnelle at 25 Queen Street, Corowa and 75 Main Street, Rutherglen, Ph 02 6033 2233.