Making the move to residential aged care can be a difficult and stressful time for families, both emotionally and financially. Here are five common mistakes to avoid in the transition.
Mistake 1: Making a rushed decision about how to fund the accommodation payment
Aged care decisions often need to be made quickly and the pressure to secure a place can leave families feeling rushed into making complex financial decisions without understanding the implications. We typically see accommodation payments ranging between $400,000 - $700,000 but they can be higher. A new aged care resident has just 28 days to decide whether to pay a lump sum, a daily payment (like a loan) or combination of the two. The best option is different for everyone so it’s important to seek advice.
Mistake 2: Selling the family home without understanding the implications
The first thought for many faced with funding aged care is to sell the family home. This can negatively impact Age Pension entitlements by increasing your assessable assets and therefore increase aged care costs. In some cases, it is still the right decision, in others a different funding approach is better. Seek advice because either option may have unintended impacts.
Mistake 3: Not having sufficient income or cash to fund ongoing aged care costs
The accommodation payment secures an aged care place, but there are also ongoing care fees to consider. The Basic Daily Fee which all residents pay, is currently $49.07 per day ($17,910 p.a.) but many will also pay a means-tested care fee of up to $26,381 p.a. depending on their assets and income. The families we work with find it a great relief to fully understand the costs and to plan options to pay them such as using cash reserves, pension payments or selling down investments.
Mistake 4: Children supporting parents without understanding the impact
Adult children often want to help their parents fund the accommodation payment to secure a place in the best facility. This can unwittingly increase ongoing costs by giving their parents money or assets which then become assessable for the means-tested care fee calculation. Consider alternatives such as paying ongoing costs, which generally do not impact the means-tested care fee.
Mistake 5: Not having estate planning affairs in order
Getting estate planning documents (e.g. Power of Attorney) reviewed prior to entering care removes a lot of stress at an already emotional time. Consideration should also be given to any assets that may pass to a beneficiary in aged care, where again their means-tested care costs could sky-rocket, quickly eroding family wealth when it is entirely avoidable.
If you or someone you know are facing decisions about aged care, please ensure you speak with a trusted adviser before making commitments. We can help, call us on 1300 134 187, or click the link below to book a consultation.