Navigating the Complexities of Funding Aged Care
As our population ages, it's increasingly common for adult children and relatives to assist elderly family members with aged care costs. While this is often a generous and well-meaning decision, it comes with significant financial, legal, and emotional considerations. At ActOn Wealth, we help families navigate these complexities, ensuring optimal outcomes for all involved.
Reasons Families Fund Aged Care
Families may step in to fund aged care for various reasons:
Preference for a Specific Facility or Room: Desired accommodations may only be accessible to self-funded residents. Retaining the Family Home: Avoiding the sale of the family home to preserve its value or maintain its use. Delays in Asset Liquidation: Allowing more time to sell assets or restructure finances.
While these motivations are understandable, it is crucial to ensure proper planning and legal protections are in place.
Key Considerations for Families Funding Aged Care
Accommodation Payments: Families can assist with lump sum Refundable Accommodation Deposits RADs, Daily Accommodation Payments DAPs, or a combination of both. The choice between lump sum and daily payments has implications for cash flow, estate planning, and social security.
Means Tested Fees MTFs: Lump sum payments are treated as an asset of the resident, potentially increasing MTFs contributions and affecting social security entitlements if not structured correctly.
Legal Protections: Establish loan agreements to formalise financial arrangements and ensure the refund of lump sum deposits to the contributor. Update wills to reflect these contributions and prevent disputes among beneficiaries.
Timing and Room Preferences: Moving a supported resident into a self-funded room requires careful planning to ensure assets are appropriately allocated before fee assessments. Practical strategies include negotiating with facilities for preferred room arrangements.
Estate Planning Implications: RADs are refunded to the estate, not directly to the family member who provided the funds, unless formal agreements are in place. Address potential disputes by consulting legal professionals to ensure the contributor's rights are protected.
Strategies for Funding Aged Care
Lump Sum vs Daily Payment: Lump sum payments are fully refundable but impact means-tested fees. Daily payments offer flexibility but are nonrefundable and may incur higher overall costs.
Loan Agreements: Formal agreements ensure that funds are returned to the contributor upon the resident's departure or passing. Loans can also help manage estate planning and avoid disputes among family members.
Rental Income from Family Homes: Renting out the family home can generate income to cover fees while preserving the property. Note that rental income is assessed for both social security and aged care purposes.
How ActOn Wealth Can Help
At ActOn Wealth, we provide tailored aged-care financial advice to:
Optimise Contributions: Balance funding arrangements to minimise fees and maximise entitlements. Coordinate Legal and Financial Advice: Collaborate with legal professionals to formalise loan agreements and update estate plans. Protect Family Harmony: Ensure clear and fair arrangements that prevent disputes.
Contact ActOn Wealth today to navigate the complexities of funding aged care costs with confidence and peace of mind.
