As Australians are living longer than ever before, aged care financial advice has become crucially important for many families. Aged care financial planning includes understanding the various costs associated with aged care services and developing smart strategies to enhance security, minimise costs and achieve desirable investment returns.
Understanding the Aged Care System in Australia:
Within Australia there are a range of aged care services available, providing for the diverse needs of seniors. These extend from in home services, to full nursing care. To determine what level of care is most suitable for you and to maximise any potential government support and benefits, it is important to understand the various eligibility criteria and associated costs involved with these services.
The Australian government provides funding via programs such as the Aged Care Assessment Team (ACAT) and the Home Care Packages Program. Such programs offer financial support based on the care needs of an individual. Where full nursing care is required, the government prescribes legislated minimums that nursing facilities must provide residents. Including ensuring a baseline level of quality and safety. As well as cover areas such as staffing ratios, access to medical professionals and medication management.
There are four fees that apply when living in a nursing home facility:
- The basic daily fee, which is currently $21,527.70 p.a. and set to 85% of the Centrelink Age Pension single rate,
- The means tested fee, which has a current maximum yearly limit of $31,706.83. As well as a lifetime limit of $76,096.50,
- The actual cost of the room, which will differ by provider. This can be paid as either a Refundable Accommodation Deposit. Meaning you provide a lump sum up front, and your daily cost is reduced proportionate to the total cost of the room (e.g., paying $300,000 towards a $600,000 room will reduce your ongoing cost by half). This deposit is fully refundable on death and can be negotiated with the provider.
- Any extra facilities the provider offers, which come with their own costs and need to be confirmed with the provider. These are often optional and can differ between facilities.
Key Considerations in Aged Care Financial Planning:
When exploring aged care financial planning, it’s paramount that you assess your current financial situation and anticipate future caring needs. Conducting a thorough evaluation of income, assets, and expenses will help you determine the financial resources available to cover the costs of aged care. Costs can include accommodation, personal care and medical expenses. Understanding these expenses will help define how capital needs to be allocated to optimise your position to meet income needs and where applicable maximise age pension. Establishing an aged care financial plan will provide both individuals and families a clearer pathway and budget to manage the care needs of their loved ones, securing a more comfortable aged care experience.
Financial Tools, Resources and Investment Options for Aged Care Planning:
There are several financial tools, resources and investment options available to assist with aged care financial planning. An example is annuities and reverse mortgages. These options can provide you with a regular income stream or access to home equity to fund care expenses. Annuities provide secure income and can offer capital protection, as well as potential Centrelink benefits. Home sale or downsizing will often be considered and superannuation and pension funds as well as other personal investments, may be used to cover aged care costs. Seeking the advice of a trusted financial advisor who specialises in retirement and aged care, can be invaluable to navigate these financial instruments and to tailor strategies that cater for your individual circumstances. Additionally, online resources and calculators are available to provide estimates and insights into the financial implications associated with different aged care options.
Legal and Estate Planning Considerations:
Aged care financial planning is not just about restructuring your financial position for aged care needs, it also involves addressing legal and estate planning matters. Having necessary legal documentation in place, including wills, powers of attorney and advance care directives are essential. These documents ensure that an individual's wishes are respected and that decision making powers are entrusted to the right individuals in case of incapacity.
Estate planning is another key aspect that must be considered within any aged care financial plan. Estate planning helps protect assets and facilitates a secure transfer of wealth to the next generation. Consideration of tax implications for the estate should be paramount in personal financial planning for aged care also. Requiring deep thought and consideration. A good financial advisor will help you create an aged care financial plan that considers the capital and income needs of their client, while remaining considerate of their client's estate planning intentions, so that their position is structured well for both. Consulting legal professionals who specialise in elder law can provide guidance around establishing a comprehensive estate plan.
Strategies for Aged Care Funding:
When it comes to funding aged care expenses, there’s a range of options available to consider. Self-funding is an option for those who possess substantial assets and income streams. However, for those who require additional financial support, equity release products and selling your property can provide you with access to capital. This can open superannuation strategies that can be highly tax effective.
Some may consider aged care loans, which can allow you to borrow against your assets to cover the costs of care. Consideration needs to be given to likely longevity and how age pension may be impacted as well as how assets are structured to meet the individual's income needs and ultimately to meet the wishes for how assets are to be left to the estate. Each funding strategy comes with both advantages and disadvantages to consider, highlighting the significance of seeking support from a financial advisor to help you weigh up the long-term financial implications that come with each avenue.
How Yield Financial Planning Can Help:
Aged care financial advice plays a crucial role in ensuring seniors receive the care they need while maintaining financial stability. The advisers at Yield Financial Planning are experts in aged care financial planning and are here to guide you and your family through the complexities of the aged care system.
Early planning and ongoing reviews of your financial plan are key to adapting to changing circumstances. With our support we will help you achieve a secure transition into aged care. To learn more or start the conversation around how aged care planning could look for you, get in contact with a Yield advisor today.