When it’s time to enter a residential aged care, we are often confronted with issues like how do we pay the accommodation bond and how do we keep up with daily fees associated in nursing home.
Do we have enough funds to cover all the costs? Do we need to sell the family home? This is one of the most difficult decisions Brisbane families must face during this highly emotional time.
It is even more difficult when you have a spouse, a carer, or adult children living with you. Suddenly, the decision is not yours alone to make. You have to consult with your family members to decide whether you will keep the family home or not.
Selling the family home in Brisbane or QLD is probably still the most common strategy to fund accommodation bond for residential care. For some Brisbane residents, it’s the most convenient route. But things are changing, especially since the new aged care reforms took effect in July 2014. With more than one way to pay the accommodation bond (now called Refundable Accommodation Deposit or ‘RAD’), the resident has now more flexible options to choose from. The Refundable Accommodation Deposit or RAD can be paid upfront in full, through Daily Accommodation Payment or DAP, or combination of both. You can finalise your choice of payment after 28 days of entry in residential aged care.
While selling the home can still be the most preferred option for some, others should be careful because this move can further worsen their financial situation if they are not aware of its implications. As a simple guide, if the house is valued significantly more than the RAD amount payable, it may be better to keep the home instead instead. Every situation is different though. What works for others may not work for you. That is why it is important that you seek a trusted aged care financial adviser early on to avoid costly mistakes. The decision will largely depend on the assessed value of your home, your accommodation bond, your savings or other source of income, and assets.
Other aged care costs:
Let’s say you are able to pay the RAD easily. You have to be aware that there are still other nursing home fees that you have to prepare for. That’s why it is important to have a financial plan for steady cash flow all throughout your stay in residential aged care. There is what’s called the Basic Daily Fee, which covers daily living expenses while you are in residential aged care. Currently valued at $46.50, the Basic Daily Fee pays for your daily meals and laundry services among others. The other cost that you need to prepare for is the Means Tested Care Fee, which is calculated based on your assets and income. The Means Tested Care Fee, in any case, should not exceed the actual cost of care. Some aged care providers also require Additional Service Fee for extra services or luxury care you might need throughout your stay.
Here is an example, as detailed this recent article :
If your house has greater value than what you need to pay for aged care, it is generally more attractive to keep the home instead. Let’s say you are receiving aged pension, have $45,000 savings on your savings, your home is valued at $700,000, and you need to pay RAD worth $400,000. This means you need around 2-3 per cent annual tax rate of return to be better off keeping the house. In addition, generating 2-3 per cent residential yield will mean having enough rental funds to pay for the nursing home fees. However, if your house is valued at $300,000, you will need 6.2 per cent return annual return and it will not yield as much rental income as the previous case. As a result, the family needs to raise additional funds to cover all the nursing home fees. At the end of the year, it is estimated that the family will be short of $15,000. However, if you think that your house will increase in value in years to come (at least four per cent a year), holding on to your home may not be a bad idea after all.
Whatever your decision may be, it is important that you seek expert aged care financial advice before making a final move. It is also important that you have a solid financial plan before you enter a Brisbane residential aged care to keep your family from financial and emotional strain during this difficult time. Having peace of mind during your prime years is priceless. We hope for nothing, but the best for you! Don’t hesitate to call us on (07) 3229 0023 for a free initial consultation so we can help you in your aged care journey.
Disclaimer: the information contained herein is general in nature and does NOT constitute financial advice .
Andrew Tynan Financial Planning Pty Ltd ABN 43 113 607 739, trading as Brisbane Aged Care Financial Advisers is an authorised representative of Charter Financial Planning Limited (ABN 35 002 976 294), Australian Financial Services Licensee.