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Cost of Aged Care without Specialists Aged Care Advice

By Jeremy Gillman-Wells, Lead Financial Professional, Heather Hill Pathways.

How can it cost me more if I don’t get financial advice?  Surely every facility charges a set amount to stay there per day, like a hotel?  Unfortunately, no, it’s nowhere near that simple.  Let’s take low care facilities, or hostels as they were formally known, as an example.  These facilities generally charge an accomodation bond plus a daily care fee and then an income-tested fee on top of that.  Now the first charge, the accomodation bond, is a lump sum payment to the facility by residents who have assets valued at more than the minimum assets amount (currently set at $41,500 as at 20 September 2012).  Many facilities calculate the bond in an over simplified way and this highlights the need for financial advice before signing on the dotted line.

The most common method involves the facility asking you to complete a Centrelink asset assessment booklet, looking at your assessable assets, deducting the minimum asset limit and asking you to pay whatever is left over.  For example:

  1. if your assessable assets are worth $100,000, they would deduct $41,500, leaving you with a $58,500 accommodation bond to pay; or
  2. if your assessable assets are worth $500,000, they would deduct $41,500, leaving you with a $458,500 accommodation bond to pay; or
  3. if your assessable assets are worth $1,000,000, they would deduct $41,500, leaving you with a $958,500 accommodation bond to pay.

This is all for the same room and doesn’t necessarily relate to the location of the facility, its age, house prices in the area or even the usual market accommodation bond for a facility of that type.  As you can see, depending on how well your finances are planned the cost of the accommodation bond could be hundreds of thousands of dollars more expensive than it could have been had your assets been structured differently.

Additionally, many families do not even know that they are not required to tell the aged care provider the results of their asset assessment when negotiating the accommodation bond unless they absolutely want to.  Obviously, in some circumstances like the third example above, this would be a much more advantageous strategy if the family wishes to secure a lower accommodation bond.

Unfortunately it’s not even as simple as negotiating a lower accommodation bond.  In a lot of circumstances it may be far more beneficial to pay a higher accommodation bond. The bond is not counted for your Centrelink assets test so paying more actually reduces the value of your other assessable assets which in turn helps to qualify for higher age pension entitlements and lower daily costs of care.  This additional cashflow is very important when you consider things like the rising cost of medications and specialists as you or your parents get older.

Ultimately, your best strategy will only become apparent after an expert examination of your financial position by a financial planner that specialises in aged care advice.  Just some of the things you will need to consider are:

  • will you be using extra services,
  • whether to sell or keep the family home and if you want to keep it, will you rent it out,
  • what are your weekly cashflow needs for lifestyle outside the aged care facility,
  • will you keep your car and what will happen with your household contents,
  • do you want to gift any money now,
  • have you considered pre paying for your funeral, and
  •  whether you want to leave anything, especially specific assets such as property, to your children.

So, before you start complaining about the cost of last year’s Christmas presents, consider the bigger picture that might be looming ahead this year or the next.  If not for yourself, for your parents or for your own children.

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