By Delta Smith
Welcome to our blog on aged care, where we explore crucial topics like funding, estate planning, and other key considerations.
Primarily, the resident’s care requirements are at the heart of the decision-making process, with funding arrangements subsequently determined. While some families wish to keep their loved ones within their local community, others place a higher priority on specialised care needs.
Key Parties in Aged Care
When it comes to aged care, several key parties are involved:
- The resident entering care
- Their family
- The aged care facility
- Services Australia
- Professionals for financial and legal advice
Understanding Aged Care Funding
Aged care is means-tested, so residents who can afford it (based on their income and assets) contribute to their care costs. These costs include:
- Basic Daily Fee – currently $63.57 per day
- Accommodation cost – payable as a lump sum or ongoing amounts
- Means Tested Care Fee – dependent on your means
- Service Fees – as set by the facility
Case Studies: Aged Care Funding
To illustrate how aged care funding works, we have two example cases:
Case 1: A couple living in their own home with assessable assets of $700,000, including lifestyle assets, cash in the bank, Account Based Pensions, and shares. The outcome for this case was that the spouse remained in the home as a ‘protected person,’ while the resident entered an aged care facility and paid a basic daily fee of $63.57 per day and a means tested care fee of $4.08 per day.
Case 2: A couple with assessable assets of $1.8 million, including lifestyle assets, cash in the bank, term deposits, Account Based Pensions, and an investment property. In this scenario, the spouse also remained in the home as a ‘protected person,’ and the resident paid a basic daily fee of $63.57 per day and a means tested care fee of $30.60 per day.
Neither of the examples include the funding of the accommodation cost or services fees that the facility might charge for access to things like paid TV, premium linen and so on.
Other Considerations in Aged Care
Beyond funding, the other important considerations are:
- Estate Planning
- Powers of Attorney
- Centrelink Implications
Estate Planning
Estate planning is a vital component of a financial plan. It involves ensuring that upon death, the appropriate assets go where you want them to go and that others can step into your shoes if you are unable to make decisions yourself. Here are some key elements to consider:
- Enduring Power of Attorney: This legal document allows a person to appoint someone to make decisions on their behalf if they become unable to do so. It is crucial to have an enduring power of attorney to ensure that financial and legal matters are managed beyond loss of capacity.
- Wills: A Will allows a person to direct how their assets are to be dealt with after their death. It is essential to have a current, valid Will to ensure that wishes are clearly expressed. A Will can only dispose of assets that form part of a deceased’s estate (i.e., estate assets). Assets not owned by the deceased in their own right must be transferred by other means (e.g., jointly owned assets, assets held in trust).
- Testamentary Trusts: These trusts are created by a Will and come into effect upon the person’s death. They can provide tax benefits and asset protection for beneficiaries. A testamentary trust can be an appropriate tool for managing the distribution of assets.
Centrelink implications can arise in various scenarios related to aged care and estate planning. Here are a few examples:
- Asset Assessment: When entering aged care, Centrelink assesses your assets to determine the level of fees you pay. This assessment considers factors such as whether you are single or married and the retention of the family home. The basic daily fee is paid by all residential aged care residents. The Means Tested Care fee is based on your means and is payable on a daily basis, ranging from possibly zero if the resident qualifies as a supported resident to an annual maximum and a lifetime cap. How you pay the accommodation costs also impacts your Centrelink entitlements and this treatment differs from the aged care fee assessment.
- Gifting and Deprivation Rules: If you gift money or assets to family members, Centrelink may apply deprivation rules, which can affect your pension entitlements. For example, if you gift $50,000 to your children, Centrelink will still assess part of this amount as your asset for a 5-year period, impacting your eligibility for benefits.
These examples highlight the importance of understanding how different financial decisions and changes in your circumstances can impact your Centrelink benefits.
To find out more check out our Fine Answers podcasts on aged care, including the changes coming in July 2025 or give us a call on 03 5221 7700.
This blog contains information that is general in nature. It does not take into account the objectives,
financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
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