"Eye-opening" is how Prue Fergus Griffin describes the search for aged care for her seriously ill father.
Prue's 75-year-old father is mentally alert but has a rare degenerative disease which requires round-the-clock physical care. No longer able to care for him unassisted, Prue and her mother started looking at their options.
They quickly ruled out in-home care as too expensive, so then the search was on for a suitable home for her father.
What Prue found surprised and dismayed her. One attractive aged care village offered reasonably priced units but no 24-hour emergency care and high exit costs. "You needed to read the fine print in the contract", says Prue. That's when they decided they needed professional advice.
"You need a financial adviser who specialises in aged care who can assess your options with a view to your personal financial situation, the tax implications and government rebates", she says.
The upshot was that Prue's parents sold their large Sydney apartment for close to $1 million. The proceeds from this sale, plus most of the couple's share portfolio, were used to pay a $600,000 refundable deposit at an aged care facility and ongoing monthly costs for extras like physio and haircuts.
Prue's mother also bought a much smaller apartment for herself around the corner from her father's new home.
Time for action
Unlike Prue's family, who had time to prepare for the move into aged care, many families avoid even talking about the issue until there's a crisis. Perhaps Mum or Dad's health deteriorates or they have a fall. Suddenly there are difficult personal and financial choices to be made at a time when emotions are running high. So where do you start?
The first step is to get an assessment by a team of health care professionals. Your GP may be able to give you a referral1. They will decide your eligibility for Government-subsidised residential care, the level of care you need and discuss your options.
It's always good to visit a few facilities to get an idea of what's available. As well as cost, you need to look at the suitability of rooms and common areas, the type of care available and the activities on offer.
What does it cost?
This is where it gets complicated. Aged care facilities have a range of fees including an accommodation charge which residents can pay in one of three ways:
- A lump sum refundable accommodation deposit (RAD). This is refunded when you leave the home, less any deductions you agree to.
- A daily fee or daily accommodation payment (DAP). This is not refundable. It's calculated as the RAD multiplied by a given interest rate and divided by 365 days.
- A combination of the two.
When you find a place you like you submit an application form with your assessment report. You also need to fill in a Centrelink Income and Assets Assessment.
The Commonwealth government pays for the bulk of aged care but people who have the means are expected to contribute. It is not uncommon to see accommodation payments of $250,000 - $550,000 across Australia but prices are sometimes higher. Residential services need government approval to charge more than $550,000.2
Selling the family home
One of the biggest decisions is whether to sell the family home to pay for aged care. Before jumping in, it's worth assessing the impact on Mum or Dad's age pension entitlements as well as the cost of care at their new aged care home.
In some cases there may be no choice but to sell. But if you want to keep the house and there are other assets to pay an accommodation charge, it may be better to rent it out and use the money to pay for any means-tested care costs.
If your parents are getting a little frailer, now is the time to start thinking ahead about your aged care options. It could help avoid costly surprises in the future.
"Mum doesn't regret any of her decisions. She feels the advice she received was good and she's not running out of cash, but she won't be going on any overseas holidays", says Prue.
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This information is current as at 01/07/2015.
© BT Financial Group 2015.
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