They deserve nothing less
They deserve nothing less
A move into residential aged care often involves major financial decisions being made under difficult circumstances. The support of an adviser who specializes in these matters and who can explain your options and their implications in an impartial and professional manner is desirable if not essential.
The ever-increasing life-expectancy we are enjoying brings with it the downside that many of us will experience debilitating illness in our later years. In particular the incidence of Dementia related illnesses has risen significantly and 80% of older Australians will access some form of community or residential aged care service[1].
The government has responded with financial support for residential aged care and a range of home-care support packages. Assisting a parent or relative or friend’s admission into residential care is often emotionally very challenging; navigating Centrelink, DVA & DHS regulations as well as having to choose a suitable facility can be extremely stressful.
A move into residential aged care often involves major financial decisions being made under difficult circumstances. The support of an adviser who specializes in these matters and who can explain your options and their implications in an impartial and professional manner is desirable if not essential.
When you first set foot in the Aged Care financial world you will find yourself confronted with a bewildering array of specialist terms each with its own 3-letter acronym. The fees associated with entering a facility are called a Refundable Accommodation Deposit (RAD) or Refundable Accommodation Contribution (RAC) which can be paid as a Daily Accommodation Payment (DAP) or Daily Accommodation Contribution (DAC).
The RAD is a lump sum payable to the facility for the right to occupy a room on their premises. It is important to understand that the resident will not own the room. The RAD which can range from $200,000 to over $1,000,000 will be repaid when the resident leaves the facility and is government guaranteed. Many factors influence the size of the RAD and all approved aged care facilities are required to list their RAD on the Commonwealth Government’s website – myagedcare.gov.au.
The entrant into care must deal with two financial issues: funding the RAD and ongoing cash-flow.
The RAD may be paid in full or in part with interest at a prescribed rate being payable on any outstanding balance. How to fund the RAD is one of the critical issues to be addressed by a specialist adviser. Options can include liquidating investments, borrowing, selling the family home or retaining it and renting it out. Each option has significant ramifications for other costs and government benefits.
Ongoing costs can include as many as five elements.
- If the RAD is not paid in full, there will be a continuing interest payment (DAP)
- All residents will pay a Basic Daily Fee which is set at 85% of the daily full rate age pension (currently $50.16). This rate applies irrespective of whether the resident actually receives an age pension.
- Some residents will be required to pay a Means Tested Fee (MTF) which is calculated under a formula taking into consideration both the resident’s assets and income. This fee can be as high as $245 per day.
- Fourthly some facilities charge what is called an Extra Services Fee. This allows access to a wider range of menu options, wine/beer with meals, cable TV and onsite facilities such as hairdressing. Not all facilities offer extra services but for some of those that do this is a mandatory fee.
- Finally, residents and their families may need to provide an additional sum for discretionary expenditure.
The total daily fees are tallied and the resident is billed monthly. Invoices of $1000 to $4000 are not unusual and reflect the chosen facility and the resident’s financial means. If a resident is in receipt of the Aged Pension or a Department of Veterans Affairs Pension then decisions made about how to fund the RAD and the ongoing daily fees can also affect the level of pension received.
Entering Residential Care is one of the biggest and most complex financial transactions most people will be involved in. Making the right choices will have a big impact on the family’s peace of mind and the resident’s comfort. They deserve nothing less.
Advisersure Financial Consultants is an Accredited Aged Care Professional practice specialising in aged care advice and is Corporate Authorised Representative No. 424041 of MyPlanner Professional Services Pty Ltd ABN 51 159 696 830 AFSL No. 425542
[1] Australian Institute of Health and Welfare: Australia’s welfare 2015
