Planning for aged care

Accommodation bonds can seem like the equivalent of a blank cheque to some aged care facilities but what can you do to ensure you’re being treated fairly?

Aged care facilities charge potential residents an accommodation bond which can vary from $130,000 to almost $1,000,000 if you wish to reside in Melbourne or Sydney. Few facilities offer set fees and the amount you pay is generally equal to the amount you have available, minus the government mandated $38,500 that a resident must be left with. High-care facilities are not at present able to charge such a bond although this may change.

So what happens to all this cash that the facility management takes from its resident? It does earn interest but the facility management is allowed to retain an amount each month, which is currently capped at $307.50 and this can be taken for a maximum of five years. Are you beginning to understand why so much is taken as an initial bond? Now, of course there are liabilities involved with running an aged care facility and the management has to ensure that it will not be left out of pocket but this does not mean a set scale of accommodation bonds would not be a fairer method.

Until this changes potential residents are left with the task of finding the money required before they can access the care they need. For many this may mean liquidating assets such as selling the family home, which has consequences:
·tthere may be a remaining spouse who needs somewhere to live
·tproceeds from the sale of a family home are exempt from the Centrelink asset test for up to two years; this will not apply to the amount used as an accommodation bond, which may in turn mean a lower Age Pension.
Some facilities will accept the bond in partial payment but interest will accrue on the part unpaid. The upside of this is that by paying your bond in this manner, any income received from renting out the family home is not assessed by Centrelink.

Another option may be getting an adult child to pay the bond but there may be knock-on effects in terms of the distribution of the estate. Reverse mortgages are often used to finance this kind of bond but it needs to be borne in mind that interest on the loan is capitalised and will therefore increase the amount owed. Many lenders will guarantee that you will not go into negative equity, this is an extremely important aspect of the loan to be determined before signing on the bottom line.

On top of the bond, there are also ongoing daily fees that cover extras not included in the standard fee structure. Daily fees are income-tested and are currently capped at $63.48 per day, a substantial amount over the course of a stay. Actions can be taken to reduce your assessable income which can reduce your income-tested fee.

So before you sell up the family home and knock on the door of your nearest aged-care facility looking for a bed, seek independent financial advice from a planner who specialises in managing aged-care funding. Such a plan can cost between $500 and $2000 depending on the complexity but it can save you a small fortune in the long term.

To find a financial planner in your area, click YOURLifeChoices simple shortcut to the Financial Planning Association

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