Many Australians are facing, or will face in the future, the intricacies of dealing with Aged Care. It is the children of aged care recipients that are likely to be the ones doing the research and making the decisions on behalf of their parents. When faced with aged care decisions the family will often be forced to act quickly without being fully informed. Seeking advice early and planning ahead, before aged care is needed for your family member, will result in a much better outcome.
The government rules will change in mid 2014, which will see a more rigorous means test applied, and potential increases to the financial complexity and costs associated with entering and staying in an aged care facility. My advice is to be proactive and educate yourself about aged care before your family member needs to move into an aged care facility – this will greatly assist you to make informed decisions.
About 17% of Australians who are over 65 are currently in some form of formal care. It is estimated that about 37% of women and 24% of men who reach 65 will, at some stage, enter aged care. (Source: Australian Bureau of Statistics – 2011)
There are a number of options (listed below) for people requiring a significant level of professional care, though availability generally depends on a medical assessment.
- Nursing homes
- Aging in place facilities
- Extra service nursing homes
- Extended aged care at home
- Private care
Issues to be aware of when dealing with aged care:
Complex decisions associated with aged care such as determining a suitable aged care facility, dealing with the entry, ongoing and exit fees charged by the facility, legal issues and contracts, and how your decision may impact government benefits. Often these decisions need to be made at an emotionally stressful time for the family.
High cost of aged care entry fees. Entry fees can often amount to hundreds of thousands of dollars and deciding to sell the family home to cover this cost can have an adverse effect on the recipient’s financial affairs, for example the decrease and/or loss of government benefits such as the aged pension and/or additional aged care facility fees.
Supply and demand imbalances are making it harder to acquire a bed in an aged care facility. The number of Australians who need aged care is increasing due to an ageing population and increasing life expectancies. At the same time the number of beds available is not keeping up with the increased demand. The aged care sector is highly regulated by the Federal Government which has deterred private investment in the sector further exacerbating the supply and demand imbalance.
Trauma and stress is experienced when moving from the family home to an aged care facility. Poor health of a family member coupled with a loss of independence can be a very stressful experience for the whole family.
Loss of benefits. Many Australians are asset rich and income poor. Due to large increases in home prices over the last two decades, many Australians own a substantial asset in their family home. However, the majority of their income is derived from government benefits such as the aged pension. Often the aged care recipient may feel the need to sell the family home to fund the entry fee to secure a place in the aged care facility. This action may cause the aged care recipient to lose or partially lose their Government benefits and be faced with extra aged care facility fees.
Estate Planning. The move to an aged care facility is often triggered by an event whereby the family member is unable to care for themselves due to a loss of a mental or physical capacity. It is important to seek estate planning advice prior to any loss of capacity to ensure assets are managed in accordance with the family member’s wishes and decisions are legally sound.
Strategies and options to consider:
Retaining the family home may reduce the loss of benefits and the level of trauma and stress associated with the aged care experience. Once the decision is made to enter an aged care facility, you may consider retaining the aged care recipient’s family home and/or renting it out rather than selling. Instead of selling the family home to fund the aged care entry fees there may be alternative options such as the Centrelink Pension Loans Scheme, reverse mortgages or paying the aged care entry fee in periodic payments. Renting out the family home may also partially or fully offset any losses in government pensions or increases in aged care facility fees which may arise due to the aged care recipient moving from the family home to the facility.
Insurance bonds and Annuities can also be an effective tool in maximising government benefits and minimising aged care facility fees. If the decision has been made to sell the family home and enter an aged care facility, you may consider investing any remaining proceeds from the sale of the home into an insurance bond or an Annuity. Insurance bonds and Annuities are investments offered by Iife insurance companies. Establishing an appropriate insurance bond or complying Annuity for an aged care recipient can, in some cases, reduce the impact on the means test counting towards Centrelink benefits and aged care costs
Often people experience the need for aged care services suddenly because something has happened – for example a family member has just had a stroke or a fall and they urgently need help in making decisions about aged care. For others, the process is slower, with a gradual realisation that daily living activities are getting harder to manage due to progressing dementia. Whichever is your experience we can assist you by putting the appropriate structures and funding in place.
Seeking advice early and planning ahead can reduce the stress involved and assist you to better understand the complexity of the subject. Being proactive and educating yourself about aged care before your family member needs to move into an aged care facility will greatly assist you to make informed decisions.
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