Planning ahead for aged care

“Time flies when you’re having fun,” is a common saying that often leaves us pondering where it all went. Ideally, we’d want to look back and see a life filled with dream-chasing, career achievements and cherished moments with family and friends.

However, amidst the enjoyment of our earlier years, it’s important to consider the future. Planning ahead for aged care services someday is in our own best interest and that of those we love.

At First Financial, we forge lifelong relationships with our clients, working alongside them through the inevitable life changes and stages they will face on the journey. Sometimes, the need to enter aged care arises suddenly. That’s why having a plan in place is so essential. We offer aged care advisory services to help you make smart decisions early.

As we age, it becomes progressively more challenging to take care of ourselves, particularly when dealing with illnesses. According to the Medical Journal of Australia, 20% of the population over 80 are in institutional long-term care. The number of families this impacts is significant. So, what are the potential costs associated with aged care in Australia?

While government funding heavily supports many aged care homes, there can still be significant expenses involved. In Australia, fees and charges are broken down into basic daily care fees, means-tested fees and refundable accommodation deposit.

Basic daily care fee – A basic daily care fee is a mandatory contribution for all residents to cover the costs of daily living expenses such as meals, laundry, cleaning and personal care. It is not means-tested, and the government sets the amount. The aged care facility receives the Basic Daily Care Fee, which constitutes 85% of the standard full age pension. Currently, this fee stands at $58.98 per day.

Means-tested fee – The calculation of the means-tested fee component depends on the individual’s financial situation. The equation takes into account both income and assets, including the family home. For those over the threshold, the means-tested fee applies and contributes to the cost of ongoing clinical and personal care. Centrelink completes an assessment to determine the means-tested fee.

Refundable accommodation deposit (RAD) – The RAD is a lump sum payment required upon entering an aged care facility to secure accommodation. The nursing home and the resident negotiate it together. Prices vary depending on location and the individual facility. Right now, the average RAD across Australia is approximately $470,000. Those with income and assets above the threshold but not wanting to pay the applicable RAD can opt to pay daily accommodation payment (DAP). DAP covers the cost of the room, is paid periodically and is not refundable. The resident can arrange a combination of RAD and DAP.

As you can now see, there are significant costs associated with aged care, and the landscape can be quite complex to navigate. Numerous government provided aged care services entail substantial waiting periods. Therefore, taking proactive steps before an urgent requirement arises is advisable. And you will be in a stronger position to make decisions based on the quality of care you desire.

Planning ahead for aged care will also benefit your estate planning efforts, ensuring the management of your assets in a way that supports your future care needs while also considering the best interests of your beneficiaries. Having a well-structured financial plan can also alleviate the burden on your family members, who might otherwise need to scramble to make financial arrangements on your behalf.

Ultimately, planning ahead rewards you and your loved ones with peace of mind. Should you suddenly require residential aged care, you have a perfectly sound plan in place and the transition will be as smooth as possible.

While the rules are intricate, there are a myriad of options for assisted living in the home and residential aged care. However, it’s imperative to engage specialist advice early on and prepare for the different possibilities. With the help of your financial adviser, you can utilise your assets and investments more effectively and employ strategies that will maximise government support and minimise tax implications.

At First Financial, we look at your current and future income requirements. Our advisers can assist you in assessing the potential effects of aged care on your Centrelink payments, evaluating applicable tax offsets, exploring affordability and determining your intentions for your family home (e.g. would you like to keep it and rent out, or are you prepared to sell?). They will even create up to five scenarios, ensuring you make your choices with the utmost confidence.

We can help with all the steps, including planning, determining eligibility for subsidised care, finding a provider, understanding fees and charges, making an agreement and accessing aged care services. We collaborate with other professionals to comprehensively cover all aspects of care.

Certain conversations in life are both uncomfortable and essential. Your preferences concerning aged care fall into this category. Despite its sensitive nature, it’s important to have this discussion with your loved ones. While transitioning into aged care will undoubtedly pose challenges for everyone involved, the presence of a well-crafted plan that your family is not only aware of but also comprehends can substantially ease the complexities inherent in this journey.

When engaging in these conversations with your family, ensure that you approach them with openness regarding your intentions and objectives for your later years.

Address every situation you can think of, from how to handle potential physical or mental incapacity to outlining your preferences for the type of care you would prefer to receive.

Some slight discomfort now can save you and your family unimaginable stress and anxiety in the future.

Exploring the best choices and formulating an effective financial strategy to cover your aged care expenses can present challenges. We are here to help.

Having a dedicated aged care specialist from First Financial by your side can truly make a positive impact on your financial future.

If you’d like to find out more about our aged care advisory service, contact us today.

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