What You Need To Know When Considering Aged Care
- Published: June 10, 2019
- Author: Mark Buisman
By its very nature, the entry of a loved one into Aged Care is an emotional time. This emotion can cloud decision making in even the most rational of people. It doesn’t help that on top of finding and securing a place within a comfortable facility, Aged Care funding rules and regulations are now some of the most complex you will encounter in your financial life.
Information can be hard to come by and is often fragmented or provided selectively by a source with a particular agenda. An impartial, well informed third party can save both money and angst. Key points that will need to be addressed during this time include:
The Refundable Accommodation Deposit (RAD)
Previously known as the Accommodation Bond, the RAD is the deposit required when a person enters care. As the name suggests it is refundable to the estate of the resident. While the amount of a RAD can vary and is negotiable $550,000 is a common figure. The best way to fund this payment is rarely straightforward (given factors we touch on below). Those who either cannot or would rather not pay the full amount do have an option in the form of a Daily Accommodation Payment.
The Daily Accommodation Payment (DAP)
If a RAD is not fully financed the funding gap can be effectively ‘borrowed’ by adding a DAP. At present this is based on a rate of 5.96% p.a. of the unfunded RAD, calculated on a daily basis. For example, if a family contributes $350,000 of a $550,000 RAD, a DAP of $32.66 per day will apply in lieu of the unfunded amount.
While it may be best to avoid this fee and pay the full RAD, some circumstances may make the DAP a worthwhile option.
Ongoing Care Fees
Three different types of ongoing fee can apply to residents:
- The Daily Care Fee applies to all aged care residents and is charged at a regulated level. This is currently about $51.21 and increases twice each year.
- The Means Tested Care Fee applies to most residents at a varying level based on their income and assets. The amount is calculated using a complex formula with annual and lifetime limits applying. A family home (even if rented out) receives very favourable treatment within this test meaning that selling it to fund a RAD and provide a cash buffer should be considered very carefully.
- An Extra Services Fee can be charged by facilities which satisfy certain requirements. An ESF payment relates to additional amenities provided by a facility, not additional levels of care.
Whole of Family Outcomes
Since the majority of decisions made in entering aged care will affect the estate of the resident more than it will themselves, it is very important that this event is approached from a family perspective. This will help to ensure that any decisions made in an already emotional time do not flow on to create tension between family members down the track.
Who can help?
Mark Buisman of Lanyon Partners Private Wealth has extensive experience in guiding families through the financial complexity of Aged Care entry, additionally, Mark is able to refer families to trusted, reputable Aged Care Placement agencies to assist in finding the most suitable facility for each individual circumstance. View Mark’s profile here
The information contained herein is of a general nature only and is not intended to be relied upon nor is it a substitute for appropriate professional advice. Whilst all care has been taken in the preparation of the material, it is not guaranteed to be accurate. Individual circumstances are different and as such require specific examination. Lanyon Partners cannot accept liability for any loss or damage of any kind arising out of the use of or reliance upon all or any part of this material. Additional information may be made available upon request.