When you or a loved one is transitioning into aged care, it’s easy to feel overwhelmed by the sheer complexity of the system. As an aged care financial advisor in Melbourne, my passion is helping navigate the maze of aged care rules and regulations. Here are the top three things I wish people knew before starting the process. These insights can help families make smarter financial decisions and secure the best possible care for their loved ones.
How to Get the Most Out of Centrelink
Centrelink plays a pivotal role in determining the financial assistance and benefits available to your loved one in aged care. A common misconception is that your Centrelink entitlements remain the same once entering care, but this is not always the case. Here’s what you should know:
- Means Testing: Centrelink will conduct a means assessment to determine how much you will need to contribute towards aged care costs. This assessment considers both income and assets. What many people overlook is the ability to adjust or optimise their financial position prior to the assessment. This is where our advice can make a significant difference.
- The Pension Impact: Your loved one’s pension entitlement may also be affected. However, in some cases, if done right, it’s possible to minimise reductions by understanding Centrelink’s treatment of different asset classes and income streams. Don’t hesitate to get professional advice early in the process to explore opportunities for maximising benefits.
- Gifting and Asset Transfers: Centrelink has strict rules around gifting and transferring assets, particularly in the years leading up to aged care entry. Many people assume they can simply transfer assets to family members to reduce assessable income, but this can backfire if not done well in advance or in accordance with Centrelink’s rules. Seek advice if you plan on making significant changes to your financial situation.
Entering Aged Care on Separate Days: A Lesser-Known Advantage
For couples needing care, one of the most overlooked strategies is staggering the entry into aged care by at least one day. While it might seem easier or more practical for both spouses to enter care at the same time, there are potential financial advantages to entering on separate days:
- Separate Means Assessments: Each person entering aged care will undergo a separate means test. If both enter on the same day, Centrelink may treat the couple as a single unit, potentially increasing the fees and reducing pension entitlements. By entering care on separate days, each spouse may be assessed individually, which could result in lower overall fees and better access to financial assistance.
- Potential for Retaining a Higher Pension: Entering aged care on different days can also allow one spouse to potentially retain a higher portion of their pension for longer, while the other spouse’s means-tested fees are minimised.
- Time to Reorganise Finances: Staggering entry also provides a window of time for the remaining spouse to reorganize assets or make strategic financial decisions that could improve the overall financial outcome for both spouses.
Understanding Your Options Around the Family Home
One of the most emotional and financially significant decisions families face is what to do with the family home. The family home is often the largest asset and can greatly impact aged care fees. Here are the key things to consider:
- Exemptions and Assessments: For couples, the family home is exempt from the Centrelink means test as long as one spouse remains living in it. For individuals entering aged care, the home remains exempt for two years, but beyond that, it will be assessed and may impact aged care fees.
- Rental Income Options: If the family home is rented out after moving into care, the rental income is treated as assessable income by Centrelink. Some families also use rental income to help cover aged care fees.
- Selling the Home vs. Keeping It: Selling the family home to cover aged care costs might seem like the obvious solution, but it’s not always the best one. Depending on your overall financial situation, keeping the home and structuring the finances differently could result in better outcomes. For instance, using a combination of a Refundable Accommodation Deposit (RAD) and daily fees might be more advantageous than liquidating the family home. Always explore your options before making this major decision.
A little planning can go a long way in securing the best financial and care outcomes for your family. We would love to help you through this time, as we have helped many families over the years. You can read our reviews here or check out our Google reviews also.
