Aged Care – Too many questions and not enough time

imagesCAQ20KUHFrom 1 July 2014, a person entering an aged care facility has 28 days to decide how they are going to pay the Refundable Accommodation Deposit (RAD) – do they pay the total amount or pay part of the RAD as a Daily Accommodation Payment (DAP)?

You may be asking, if I pay the full RAD won’t this increase my Means Tested Care Fee (MTCF)? The short answer, yes it will, but it will also increase your age pension, if you qualify for any part of the age pension.

Do I sell my home and invest the proceeds to ensure that I am able to cover all my costs? Am I better off investing most of the proceeds from the sale of my house and only paying part of the RAD and then a DAP? If I don’t sell my home and decide to rent what will the effect be on my aged care fees and my age pension? If I don’t sell my home and don’t rent it how will this affect my age pension and my aged care fees?

Case study

Shirley is a widow in her mid-80s, owns her $450,000 home. She has a number of term deposits worth a total of $100,000 and is in receipt of a full age pension.

Shirley never believed she may need to enter aged care, she was healthy and lived an active and full life, but unfortunately after a fall that is exactly the prospect she faced – an aged care residence with a RAD of $300,000.  She must now come up with answers to all the questions that we have asked to ensure that she makes the best decision.


1.  She could keep the home and not rent it, for the purposes of calculating her MTCF it would have a capped value of  $154,179 and it would be exempt from the assets test for age pension calculation for a period of two years.

Shirley could pay a $50,000 RAD and the balance owed could be paid as DAP. Her means tested care  fee would be low in this case $2.90 per day, however as the balance owing on the RAD is $250,000 which is subject to an interest rate of 6.69% her DAP would  be $45.94 per day. Total fees would be the basic fee, MTCF and the DAP – $95.34.

Shirley would be far better off to rent her house and her aged care fees would remain the same. The additional income she does receive from the rent does not affect her aged care fees or her age pension as she is paying a DAP and the cash flow issues would be resolved.


2. Two matters stand out in Shirley’s case she is an age pension and the RAD is not assessable for the purposes of her pension, if she only pays a part of the RAD any monies which she retains and invests depending on the amount could reduce her pension entitlement.

Secondly, any money she happened to invest would have to return better than 6.69% which is the interest rate applicable to any outstanding RAD.

In the current environment, a one year term deposit is not even returning 4% and the possible increase in her age pension could amount to a further 1.7%.

Aged care is a very complex issue and requires the assistance of an expert if you are to make all the right decisions for either yourself or a loved one – contact us today so we can help you further.

 Source: Mark Teale, Centrepoint Alliance

Estate Planning – Essential for everyone


estatePlanningEssential-5When you think of estate planning what comes to mind? For most of us, it immediately conjures up thoughts of death. Who wants to think about death when you have a whole life to live? Understandably, we often push estate planning to one side and focus on more pressing concerns such as looking after our family, paying our bills and generally living life.


If you change your view slightly, however, it’s easy to see estate planning in a more positive light. If you have loved ones that depend on you and if you want to ensure that they are properly cared for, estate planning should be important to you.


Estate planning basically ensures that the wealth you have worked hard to build is protected. It reduces the stress on your loved ones or beneficiaries by ensuring that when you pass away or become incapacitated, your wealth is transferred to them smoothly, tax effectively and according to your wishes.


Essential for everyone

The word estate can bring to mind images of vast properties and millions of dollars, but you don’t have to be wealthy to have an estate plan. You also don’t have to wait till you’re older to get your estate affairs in order.


Estate planning is essential for everyone, particularly if you:


Are the parent of minor children Have family members with special needs Have recently bought or sold major assets Have a family trust, self-managed super fund or business, and

Care about your health care treatment.


Why estate planning is important

Estate planning is vital if you want to:


  •               Avoid probate – this is often a lengthy process where your assets are frozen and cannot be transferred to your loved ones until the courts determine if your Will is valid and enforceable
  •             Minimise tax
  •              Protect your beneficiaries and your assets, and
  •             Avoid beneficiaries fighting over who gets what.


More than just a Will

Estate planning is also more than just having a Will. If you already have a Will, then you’re off to a good start. Most people, however, make the mistake of believing their Will covers all of their assets.


In reality, jointly held assets, trust assets and superannuation are excluded from Wills and should be considered as part of a comprehensive estate plan.


A comprehensive estate plan should include:

Having a valid and up-to-date Will Nominating your beneficiaries for your super Listing beneficiaries for your insurance policies Naming guardians for minor children


Setting up testamentary trusts to reduce tax liabilities for your beneficiaries, and


Choosing a power of attorney to look after your financial and personal affairs if you become incapacitated.


Get your affairs in order

The best time to get your estate affairs in order is now. We can help you set up an estate plan, ensuring you have a valid Will and enough insurance. We can also help you find the most financially and tax effective way to distribute your assets after you pass away.


Source I IOOF

Do you provide for a family member with a disability?

Disability AwarenessIn Australia, almost 20 per cent of people have a disability and this number is only increasing with an ageing population1. So who will look after your loved one when you are no longer around?


This includes not only their financial affairs, but their personal affairs  such as care and rehabilitation as well. It also raises the question, ‘who becomes responsible for that person’?

 While caring for a family member with a disability can be very rewarding, it’s also a huge responsibility and, in some cases, a full-time occupation.

Simply leaving money or the balance of your estate to a family member with an intellectual disability may not provide them with an adequate level of financial support. In fact, it could do more harm than good. It could disqualify them from access to important Government entitlements. Not only that, but if the money is accessible or they are easily influenced, it could be spent too quickly and ineffectively given their long term needs.

However, by engaging a specialist estate planner and a professional trustee company you can help prevent this from happening. A specialist estate planner can help you structure your estate appropriately and will consider the following issues:

  • Control and protection of financial affairs (for example ensuring ongoing income and payment of bills)
  • Healthcare (who makes the important medical decisions?)
  • Housing and wellbeing decisions (who decides on day-to-day expenses?)
  • Lifestyle maintenance (what are their routines, likes and dislikes, etc)

By appointing a professional trustee, they can make important financial or medical decisions on behalf of your relative with an intellectual disability, when you are no longer around.

While it’s the requirements of the intellectually disabled person that are of significant concern, it’s also important to consider the other family members’ needs, including brothers and sisters. Having a clear and effective plan means that when the inevitable does happen, you can be sure that all the important issues have been considered and subsequently addressed and that there are clear processes in place to ensure continuing care as well as financial stability.

Having a plan in place and appointing a professional trustee not only protects the vulnerable person and provides for them throughout their lifetime, but gives you and your family certainty and peace of mind.

Don’t leave it to chance, or to your family to work out, ask us today how you can plan for the future needs of your family.

Source | IOOF

1 Australian Bureau of Statistics, Disability, Ageing and Carers: Summary of Findings, 2003

This communication has been prepared on a general advice basis only. The information has not been prepared to take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individual needs and you should seek advice from your financial adviser before making any investment decisions.

Money coming your way? Don’t waste it, invest it!

moneybagAre you about to inherit a small fortune? Have you been awarded a sizeable compensation payment or had a serious lottery win? Or maybe you are expecting a retrenchment package? If so, you need to think carefully before you decide what to do with your new found ‘wealth’.


Certainly you should consider paying off some of your debt, particularly if it’s getting hard to handle. You may also want to buy one or two useful items to make life more comfortable, but it makes sense to put the bulk of it to work for your future well-being – through investing.

Many Australians see investing as something other people do. They either don’t know how to go about it, or think they need a lot of money to make it worthwhile. Yet investing sensibly gives the average

Australian opportunities to transform ‘windfalls’ into longer term security.

In fact, most of us are investors already, through our superannuation fund which invests in a number of different investment areas, such as shares and property. An increasing number of us are taking a more direct interest, by investing in share offers such as Queensland Rail. There are various ways to invest, and numerous investments competing for your dollars.

So how can you work out what investments are best for you? You really need advice from an experienced professional financial planner who can look thoroughly at your circumstances, preferences and your attitude to risk before recommending investments suitable for your particular needs.

Source | IOOF

Death and Taxes!

Two things in life are certain: death and taxes

DeathNTaxesWhen someone passes away, although there are no official death duties, beneficiaries often inherit tax liabilities as well as assets. But there are ways to minimise these potential tax liabilities, reducing the effect of at least one of life’s certainties.

First steps

The first step in minimising any tax liabilities is to appoint a legal personal representative (LPR) for the deceased. They will need to obtain a new tax file number for the estate and then file a ‘date of death’ tax return. This will be for the period from death until the end of the financial year and every financial year after that until the administration of the estate is finalised.

Tax on inherited assets

Inherited assets which were purchased before 20 September 1985 are not subject to tax. Nevertheless, if the asset is sold in the future, the beneficiary will be taxed on the increase of value between the date of death and the date it was sold. This could be a substantial sum if the beneficiary is on a high marginal tax rate.

One way around this is to have the estate sell the asset at time of death. This means the asset will incur capital gains tax, but the tax-free threshold will apply, minimising the tax debt.

If the asset was the family home of the departed, it could be exempt from capital gains tax if it becomes the primary residence of a beneficiary or if it is sold within two years of the date of death.

Tax on superannuation death benefits

Dependants of the deceased will receive the superannuation death benefit free of tax. But adult children do not automatically qualify for this tax concession.

They need to prove to the Australian Taxation Office that their relationship with the deceased involved financial dependency.

Tax on invested income

After a person passes away, their assets will continue to earn investment income. This income will need to be declared in the tax returns the legal personal representative files each financial year until the assets are disbursed.

One way to gain tax advantages is to set up a Testamentary Trust when creating the Will. This will not only provide beneficiaries greater flexibility in distributing capital and income, but may protect the asset from legal proceedings, such as marital breakdown or bankruptcy. Income generated by the trust can be allocated among the beneficiaries in a tax-effective manner.

Getting advice

Although there is some level of inevitability in death and taxes, the taxes incurred after someone passes away can be minimised. To find out more on how to minimise tax liabilities on inherited assets, talk to your adviser.