Crystal Wealth Newsroom

The financial consideration of aged care

Money Tips

When it comes to stressful life choices and situations, the prospect of moving into an aged-care facility – or moving a loved one into an aged-care facility – is right up there.

Not only have you got the emotional side of things to contend with – which can be complicated further by one person staying in the family home while the other moves to residential care – but you’ve also got the financial side to navigate too.

And, as most of us know only too well, aged care doesn’t come cheap.

“It’s a really stressful time for everyone involved,” says Crystal Wealth Partners Director Louise Lakomy.

“A number of clients have gone through this recently, either for themselves or their parents, and it’s important to know what you’re dealing with and the options that are actually available to you.”

While most residential care facilities will ask for full payment upfront for the Refundable Accommodation Deposit (RAD), there are usually other options available – information that the facility won’t necessarily always volunteer.

“Many of them ask for the full payment upfront for the RAD, but for many people to pay this it means needing to sell the family home or seriously drawing down on their super.”

What people aren’t told is that often you do have other options, including paying a percentage of the accommodation deposit or zero accommodation deposit, and only paying the interest – meaning you don’t need to find such a large sum of money upfront.

“The best course of action depends on many factors, including the age and health of the person moving into care,” says Louise.

“If you’re moving into a residential facility in your 60s, for example, it could make sense to pay the full deposit and save paying accommodation payments every year.

“However, if the person going into the facility is in their 90s and in ill health, then another option that doesn’t require any upfront payment could be the best approach.”

Another benefit of not paying an upfront fee is the flexibility it enables.

“Some people don’t settle in an aged-care facility, or may decide it’s not to their liking or they’ve moved in there too early,” says Louise.

“By not selling your home, you keep the option of moving back there open, which is valuable for many people.”

Louise says that sometimes you have to put some pressure on the facility to offer different terms, but the vast majority of them will offer other approaches.

“Of course, the assets you have can also affect your means-tested care fee,” she says, “so it’s important to spend the time understanding the situation fully.”

In addition to the RAD, there are basic care fees, means-tested care fees and extra services to consider, which can all add up to a significant amount every year. This can be deducted from the RAD or paid in addition to preserve the deposit value.

Another consideration is the length of time it may take to receive the refunded deposit once the person in care leaves the facility.

While the accommodation deposit is refundable, it doesn’t accumulate interest until after the person leaves. And, while it is supposed to be refunded within 14 days of probate, Louise has seen it take up to two years for deposits to be refunded in full.

“On some occasions, it seems as if they wait to receive the money from someone else moving in before refunding the deposit,” says Louise. “This just adds further stress, and can drag on and on.”

“It’s a complex situation, and it’s useful to work with someone who’s not directly involved, such as a financial adviser, so they can work out the best course of action for your specific situation,” says Louise, who has negotiated with aged-care facilities on behalf of her clients.

If you’d like to discuss the best way to approach aged care financially, either for yourself or a relative, talk to your adviser or the team here at Crystal Wealth.

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