The imperative of aged care financial advice
Key messages
- Developing a comprehensive aged care plan can alleviate stress for you and your loved ones.
- Income and assets tests determine your eligibility for government aged care assistance.
- Aged care facility payments usually involve a lump sum, daily payments, or a mix of both.
There are some telltale signs that a loved one may be in imminent need of aged care support.
Forgetting to take medications, missing appointments, ignoring personal hygiene – these and various other indicators may be cause for concern. The truth is, however, that determining the financial planning elements of aged care can be confusing and stressful for individuals and families. That often leads to belated and rushed actions that fail to deliver the aged care needs for you or a loved one.
Given that the costs of aged care can be daunting, it is important to plan and develop a considered aged care financial strategy. From decisions around funding care and maximising any age pension entitlements to longer-term estate planning strategies, it pays to seek the advice of an experienced financial adviser with specialist knowledge in the area.
They can assist you with the transition into aged care, which typically requires action on three fronts.
Eligibility tests for aged care financial assistance
The Australian Government’s income and assets tests determine eligibility for subsidies and financial assistance for aged care services.
The income test assesses your ability to pay for aged care services based on your income, while an assets test determines any eligibility for government assistance. A tedious, but necessary, part of this phase is gathering all the key personal financial information and details to accurately complete the tests.
With the help of a financial adviser, you should do a thorough assessment of all your finances, including income from pension payments, superannuation and investments, as well as personal assets such as property and shares. Any liabilities or debts should also be listed. If you have a partner, you will need to provide information about your combined income.
This information is then used to calculate your means-tested care fee. Depending on your financial situation and care needs, you may have to contribute a significant portion of your income and assets towards the cost of care. This can affect any ability to fund you or your partner’s lifestyle, or impact an inheritance you wish to leave to family members.
Undergoing an Aged Care Assessment Team (ACAT) test
An Aged Care Assessment Team (ACAT) check is the principal test for people who want to access government-funded aged care services in Australia.
There are two main ways to access aged care – through an aged care facility, or via care at home. The ACAT test determines care needs and eligibility for benefits. There are several possible outcomes of this test, ranging from basic, low-level and intermediate care needs through to support for people who have conditions such as dementia who have high-level needs. ACAT tests are usually conducted by teams of medical, nursing and allied health professionals.
Making sense of all fees associated with aged care
Working out the costs and associated fees for aged care is arguably the biggest area of confusion for most people – and where financial advisers can come into their own.
Typically, someone accessing aged care must make a payment to the aged care facility either through a Refundable Accommodation Deposit (RAD), or a Daily Accommodation Payment (DAP) for those who choose not to make an up-front lump-sum contribution.
If you pay a lump sum through a RAD, the balance is refunded when you exit the aged care home. Money that is drawn down from the lump sum to pay other aged care costs is not refunded.
You can also opt for a combination of refundable lump sum and daily payments. For example, for a room that costs $500,000, you could choose to pay $200,000 as a refundable lump sum, and also pay a reduced non-refundable daily payment.
Getting appropriate financial advice can make all the difference for individuals and families as they make such complex aged care decisions. Do not put off such discussions. The best outcomes typically occur when an aged care plan is determined well before it is needed.