Adding up the costs of aged care for elderly parents
ANDREW Heaven, an AMP financial planner at WealthPartners Financial Solutions, talks about making the right aged care facility support decision for older parents.
Question: My father is 86 and a widower. He recently had a fall and can't care for himself. He needs to make the move to an aged care facility.
The cost of various facilities varies markedly. Our preferred option has a deposit of $500,000 and care fees of around $26,000 a year. My dad has $830,000 from the recent sale of his home and $30,000 in the bank. He receives the full aged pension.
Our concern is to ensure dad can afford to be comfortable in his final years and we can afford his care needs. What should we do?
Answer: In order to be admitted to an aged care facility, your father will need to be assessed by the aged care assessment team. This this will usually be booked by his GP or the hospital.
Once an ACAT assessment confirms your father requires residential care, you can approach facilities to discuss admission.
Whilst you are deciding on a facility, it is really important to recognise that your father is entitled to 63 days of respite care.
In the first instance, this may be a rehabilitation hospital but may become an aged care facility on a trial basis.
There is a daily care cost associated with this care, but this gives you time to assess the facility.
The 63 days can be extended by a further 21 days in certain circumstances subject to approval from the Department of Aged Care.
Given your dad's assets, he will be financially assessed as being an unsupported resident. This is important as he will not be reliant upon finding a place for those with low means which are often hard to find and offer limited choice.
Before focusing on the costs, I encourage my clients to focus on finding a facility that your dad and the family will be happy with. Once this is determined then the process of working out how to fund his admission can be determined.
Care costs for an aged care facility comprise the following -
- A daily care fee of $49.07 per day which everyone pays that is set at 85% of the single full aged pension.
- A means-tested care fee which is determined by your dad's assets and income. In order to have this amount determined, you complete an income and assets assessment form (SA457) and lodge this form with the Department of Human Services. If this form is not completed your Dad will be required to pay the full cost of care and will receive no government subsidy. This fee is capped and a lifetime limit applies.
- The facility may also charge an extra and additional services fee which applies to premium or extra services.
- The final cost for an aged care facility is the refundable accommodation deposit. This covers your accommodation.
It is typically the RAD that is most misunderstood and causes the most concern when planning for aged care.
As the name suggests, the RAD is refundable when a resident leaves a facility. A facility is obliged to repay a RAD within 14 days of the resident giving notice of vacating or within 14 days of being shown a grant of probate or letters of administration. The full value of the RAD is refunded unless the RAD has been used to fund ongoing costs.
You have the choice to either pay the RAD in full or choose a periodic payment known as a daily accommodation payment or a combination of both.
The DAP payment is calculated as a percentage of the equivalent RAD; currently 5.73%.
So, if you didn't pay the $500,000 RAD, your father would pay $78.50 per day as a DAP.
You need to consider which approach you wish to take.
You have 28 days from the time of signing the admission papers to decide. The facility can't refuse admission based on your preference and you have the freedom to change your mind.
There are various strategies available to reduce the MTF, maximise the Centrelink age pension entitlements and manage the future viability of your father's care.
You need to seek advice from a qualified adviser in this area to understand what options and rights your father has and how to manage his finances to get the best outcome possible.
Seek this advice before making any major decision like selling the family home.
Visit www.myagedcare.gov.au or phone 1800 200 422 for further information on aged care services.
Q&A with The Coach story first appeared on the WealthParners www.wealthpartners.net.au. They can followed on Facebook and Twitter. Any general advice in this story doesn't take account of your personal objectives, financial situation and needs.