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Aged Care – it’s complicated, and emotional

This story highlights the complexities of aged care and the financial and emotional stress that can arise for not just one person, but in this case, two.

Here is a brief outline of the circumstances.

  • Mum, Anne is 87 years of age and not in very good health. For the last 6 years she has been cared for by her daughter, Jayne who is now 61 years of age.
  • Anne is in receipt of a full age pension; her only assets are her home which she has lived in for over 50 years (because of its location is worth over $1 million) and $43,000 in a bank account.
  • Her daughter Jayne, is single, a qualified nurse and has not worked for the last 6 years while she has cared for her mum. She is in receipt of a Carer Payment and a Carer Allowance. Jayne does not own a house and has lived at home with her mum since her father passed away 20 years ago.
  • Anne’s health has been in continuous decline, and she now needs to enter residential aged care.

What happens next?

Anne enters residential aged care as a low means resident, meaning she does not have to pay a Refundable Accommodation Deposit (RAD). Her only cost is the basic daily fee of $52.25 per day or $731.50 per fortnight. Anne is in receipt of the full age pension $944.30 per fortnight, so there does not appear to an issue.

At the time of her entering aged care, Anne’s home is exempt because Jayne is still residing in the home, has done so for many years, and is receiving an income support payment – the Carer Payment. Under the legislation Jayne is classified as a “protected person”.

After a period of 14 weeks the Carer Payment ceases as Jayne is no longer caring for her mum and is therefore no longer entitled this payment. Jayne then decides she is going to return to nursing and commences work at her local hospital, continuing to reside in her mum’s house.

Unfortunately for everyone, life is about to become a little more stressful.

As Jayne is no longer in receipt of an income support payment, mum’s home becomes an asset for the purpose of calculating the aged care fees.

Anne’s status as a low means resident remains and she does not need to pay a RAD, however she now is required to pay a Daily Accommodation Charge (DAC) of $58.19 per day or $814.66 per fortnight on top of the basic fee. Mum’s total fees now are the Basic Daily Fee of $52.25 per day plus the DAC of $58.19 or $1,546.16 per fortnight. Mum’s only source of income is the full age pension $944.30 per fortnight, therefore she is just over $600 a fortnight short of being able to pay her fees.

Jayne, who is now working, decides she will pay the difference from her salary, which solves the problem in the short term.

However, two years after mum entered residential aged care, she loses her pension because of her assets, her one-million-dollar home has become an asset for the purpose of calculating her age pension entitlement.

Mum’s cash in the bank has reduced to just over $20,000 and even though Jayne is still working, her salary will not cover her own living expenses and Anne’s total aged care fees. Anne’s fees are no longer around $600 a fortnight short in paying her fees, she is now short $1,546.16 per fortnight.

The options available are not many.

They could sell the home, which is incredibly stressful for Jayne. Even though she has an enduring power of attorney and could sell her mum’s home, she is reluctant. It’s not the financial perspective, but the emotional and sentimental impact of selling the family home. After all, this is her mum’s home and she has also lived in the home for over 20 years.

Jayne considers borrowing against the value of the home and paying a Refundable Accommodation Charge (RAC) of $433,500 to the aged care facility to ensure mum no longer has to pay the DAC. The money borrowed and secured against the value of the home will reduce the value of Anne’s assets to below the threshold and she could then be entitled to an age pension of $591 per fortnight.

Mum’s aged care fees will change to the Basic Daily Fee of $52.25 per day, with a Means Tested Care Fee of $18.27 per day, making the total fee payable $987.28 per fortnight.

Jayne would then be responsible for both the short fall in her mum’s aged care fees as well as the mortgage repayments on mum’s home.

In this particular scenario, Jayne had not spoken to anyone before mum had to enter aged care and so she had no idea of the decisions she would have to make. As such, she was not prepared either financially or emotionally with the issues she had to face.

The aged care legislation is complicated but more than that, it is exceedingly emotional, and people should be prepared for and aware of the decisions that they may need to be make before they have to make them.

Talk to an expert who understands what is required so that you are prepared, and nothing comes as a shock. Don’t leave it until the last moment, decisions made under emotional stress are generally not made with the clearest of heads.

 

Source:  Mark Teale | Centrepoint Alliance

Age Pension Update – July 2019

On the 1st of July the age pension asset and income thresholds increased, in addition to the increase in these thresholds the levels at which the deeming rates of interest are applied also increased.

Two weeks after this date the government announced that the deeming interest rates would be reduced. The lower rate dropping from 1.75% to 1% and higher rate falling from 3.25% to 3%.  This drop in deemed interest rates will be effective from the 1st of July but will not be adjusted for age pensioners paid under the income test until the end of September. Any increase in the age pension will be back dated to the 1st of July.

The following tables provide an overview of the changes as well as upper limits from an asset’s and income perspective:

ASSETS TEST

Assets test threshold for full pension:

  For homeowner’s assets must be less than: For non-homeowner’s assets must be less than:
Single $263,250 $473,750
Couple combined $394,500 $605,000

 

Assets test upper limits:

    For homeowner’s
part pension assets must be less than:
For non-homeowner’s
part pension assets must be less than:
Single   $572,000 $782,500
Couple combined   $860,000 $1,070,500

 

INCOME TEST


Single:

Fortnightly income up to $174 pf Full payment
Reduction in payment over $174 pf 50 cents for each dollar
Upper limit $2,026.40 pf No entitlement

Couple combined:

Fortnightly income up to $308 pf Full payment
Reduction in payment over $308 pf 50 cents for each dollar
Upper Limit $3,100.40 pf No entitlement

For those retirees receiving a part age pension, the benefits of the increase in the thresholds are seen immediately with an increase in the first age pension payment they would receive in July.

However, for the retiree who is not in receipt of an age pension it is not as simple.

The first step for this retiree is to review their current assets or income position against the new upper thresholds, if they are under the new thresholds now is the time to lodge an application for the age pension.

If they are still just above the thresholds, by only a few thousand dollars now is the time to talk to an adviser about the benefits of a gift of up to $10,000 or the purchase of a funeral bond, up to the value of $13.250.  Both strategies will reduce their assets and possibly their income under either the income or assets test.

The minimum pension that can be paid is not $1 per fortnight but $36.70 per fortnight for a single age pensioner or $55.40 per fortnight combined for a couple.

 

Source:  Mark Teale | Centrepoint Alliance

Is it time to apply for the Age Pension?

On 1 February 2019, many people will turn 65 years and 6 months. Why is this important? For those people who turn 65 years and 6 months, it means they have reached age pension age.

Just over 70% of these people will be eligible for either a full age pension or a part age pension. The first step in the process is applying for the age pension – sounds simple doesn’t it?

A person’s age pension entitlement is based on, not only their age, but also on their personal situation, their income and assets.

Regardless of what we may think, the government is not aware of many aspects of your financial position. This means you need to complete an Application for Age Pension which consists of 25 pages and asks a total of 94 questions. In addition to this form, you also need to complete an ‘Income and Assets form (Form SA 369)’, which consists of 18 pages and 60 questions.

Depending on the answers you give to the questions asked on the Income and Assets form, you may have additional forms which you need to complete.

Sounds like a very long and exhausting process. The good news is that you do not have to wait until you turn 65 years and 6 months to apply for the age pension. You can lodge your claim 13 weeks before you turn the qualifying age, which means for those people who turn 65 years and 6 months on the 1 February 2019, you can lodge your application on the 2 November 2018.

Once you have completed the required forms, you can lodge the application in several ways:

  1. Online via your ‘myGov’ account. This needs to be linked to your Centrelink account which you need to set up with your Customer Reference Number (CRN).  If you have received payments from Centrelink previously you will have a CRN. If not you will need to apply to Centrelink for a CRN.  Centrelink will also need to confirm your identity before you set up your account.
  2. Via post to the Department of Human Services in Canberra. If you choose this method I would suggest photocopying all the documents you intend on posting and using registered mail to ensure you have a record of the application being sent.
  3. Lodge your application in person at your local Centrelink service centre.

To assist you in this entire process there is another form Ci006 ‘Information you need to know about your claim for Age Pension’, I also suggest a visit to the Department of Human Services website is a must – https://www.humanservices.gov.au/individuals/services/centrelink/age-pension

If this all appears a little daunting, talking to an expert and paying them for their assistance could be the best option.

 

Source:  Mark Teale | Centrepoint Alliance

Aged Care – Not all accommodation costs are the same!

Aged care costs are extremely complicated and issues have been raised in relation to a person entering residential aged care and having to pay a Refundable Accommodation Deposit (RAD).

What is the RAD?

A lump sum payment made by residents for accommodation in an aged care home.

Do I have to pay the RAD?

Some people will have their accommodation costs paid in full or in part by the government, while others will need to pay the accommodation price agreed with the age care home. As to whether an individual is eligible for support from the government in meeting their accommodation costs, will depend on their assets and income.

What happens if I am not able to pay the RAD in full?

If you are required to pay the RAD and are not able to pay the full amount, you will need to pay a Daily Accommodation Payment (DAP). This amount is based on the interest payable on the balance of the RAD you have not paid. The current interest rate is 5.76%. To assist with a person’s cash flow to meet the required payment of the aged care fees, a request can be made to deduct the DAP from the RAD which has been paid.

What happens to the RAD when I pass away or move homes?

Indicated by its name ‘Refundable Accommodation Deposit’, the amount that has been paid will be returned to your estate or you if you move or leave the facility. This amount could be reduced if you have requested as per the previous question that a DAP can be deducted from the RAD. It should also be noted that the RAD is underwritten by the government, in other words it is guaranteed.

The RAD is the accommodation cost, which depending on your circumstances, you do have to pay. There are, however, a couple of additional charges that have recently appeared in accommodation contracts. The charges should be closely scrutinised before any agreement is made to pay them or have them deducted from the RAD which has been paid.

These fees can appear as a ‘capital refurbishment fee’ or an ‘asset replacement contribution’ with the explanation that they are levied to cover the cost of repairing, painting and refurbishment of a resident’s room when they leave or pass away.

The Department of Health is very clear that these fees would not be supported by the legislation.

The following is a direct quote from the Department of Health website dated the 2nd of September 2016 and refers to both these types of fees:

“Where the fee does not provide a direct benefit to the individual or the resident cannot take up or make use of the services or where the activities or services subject to the fee are of the normal operation of an aged care home and fall within the scope of specified care and services”.

Painting, repairing and refurbishment of a resident’s room would fall within the category of normal operation. These services should be factored into the facilities scheduled maintenance program. The resident is certainly not going to benefit from the refurbishment after they have passed away. I do not believe the charges for these services falls within the category of fees outlined in the Aged Care Act 1997, Quality of Care Principles 2014 and the User Rights Principles 2014 which are required to be paid by the resident.

So, if you believe you are paying a capital refurbishment fee or an asset replacement contribution or one of these fees is being deducted from the RAD that you have paid, I would certainly ask the question of the aged care facility as to whether the fee can be charged under the guidelines issued by the Department of Health.

 

Source:  Mark Teale | Centrepoint Alliance