Helping consumers make better financial decisions when needing aged care help is about mapping the alternative pathways available. This means understanding rules and thresholds, and the consumer’s specific interaction with them (taking into account the offer from the provider). While it is convoluted, it can be solved rationally, and should be able to be solved very quickly.
Consumers should be able to clearly understand the financial choice they are entitled to, and decide on a pathway supported by rational and effective analysis.
That is the plan anyway. The problem is that there are so many rules and so many different situations. That the outcome for one can be very different to the outcome for another.
Generalisations are dangerous.
Here I will give 5 recent examples of where my clients were set off on the wrong track via well meaning advice.
Selling your house puts your pension in jeopardy
This is true - but it depends on the pension. However in this case the resident receiving a pension who was blind. The pension in this case is not actually means tested, so no changes in asset or income position were going to change this. Sale of the house, and the resulting proceeds actually had no affect. This certainly made decisions easier.
You are going to have to sell the house to afford this bed
Always check your numbers first!
In this case I would rate this as true-ish. The reality was that if everything lined up correctly, including finding a tenant who paid the market rate as well as having no surprises in terms of other costs, the house could be maintained and costs covered. The family decided selling was the right course of action, as the margin for error was a bit tight. During the sale process the family knew exactly what money they were needing to fund care, and they knew that they had time to sell if they needed it. Their financial knowledge gave them power over the process.
The story here is that fine tuned financial efficiency was achievable, but the family didn’t want the stress. They had enough on their plate.
You will be better off if you pay a higher bond, and you only have until June 30 to do it
It's true this is an opportunity that will soon be unavailable to Australians going into residential aged care.
Paying a bond that is in excess of the bond asked for, in exchange for some kind of discount on other fees has been a win-win for the resident and the provider for some years. Essentially, by paying more money as an accommodation bond, the resident gets to reduce assessable assets while at the same time as reducing costs. If the benefit of the reduced cost, and the better means testing outcomes is more than the resident may expect from having the money elsewhere (say in the bank), the resident is better off. So too is the provider who may be getting money at low cost compared to borrowing it. This game changes dramatically from July 1 this year, as the money paid into an accommodation bond (known as a refundable accommodation deposit after June 30) is still assessable by Centrelink.
It was suggested my client do this, however in this case there was very little benefit to the client because their pension was not actually means tested. Frankly, payment of a higher bond would have left very little cash in reserve. For this client, access to some cash in the bank as a reserve was a priority.
Don’t tell them anything
One of my clients was very determined that the government should not get to know anything their financial situation. (With money in the bank, it is probably the case the government is doing a good job of matching things up anyway). It is one thing not to get the aged pension. The means tested component of residential aged care fees can be a doozy too. And you need to have a lot of assets to have to pay the maximum. (The maximum rate kicks in on an assessable asset base greater than $2m). In the case of this lady, it turned out she was entitled to some aged pension she had not been claiming. Once she paid the accommodation bond, she was actually entitled to a good amount of pension and a minimum amount of means tested fee. Considering the maximum aged pension is about $21 500 pa, and the maximum income tested fee is about $26 500 pa, someone who was eligible for the maximum pension and zero income tested fee could be missing out on nearly $48 000 of government support by not going through the assessment. This is serious money.
Give the money to the kids
This is not going to really help. Except helping the kids that is. Centrelink means testing includes assets that have been given away in the prior 5 years. The idea of selling the home, giving money to the children and then turning up to the aged care facility with fewer assets is a recipe for disaster as the resident will be assessed as having more assets than they actually have access to (The kids don’t always want to give the money back). There is also something to be said for the having access to a higher asset base when looking for the right place.
If you manage to give your money away to the children 5 years before needing care, there may be some advantages. Particularly if the kids play ball and will use the money to help with care costs. Mum and Dad, are you listening….?
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