preparing for our parents aged care

Aged care is a serious matter, one fraught with emotional and financial hurdles - for everyone involved. But in an ageing population like ours, finding and paying for the right type of care is something we all need to prepare for.

These days, there is a trend for seniors to live at home for as long as possible. To facilitate this, the government provides subsidised ‘home and community care’ (HACC) that offers varying levels of inhome care for retirees. Seniors need to be assessed by an Age Care Assessment Team (ACAT) to determine the level of care required, and the exact cost will depend on the extent of the service, the provider and your ability to pay.

Further along the spectrum of care are live-in facilities, broadly divided into ‘low level’ care formerly known as hostels, and ‘high level’ care, often referred to as nursing homes. Securing a spot in either can take time - anywhere from a few days to a few months.

working out the financials
Both types of facilities are required to offer a number of places to those who can’t shoulder the cost, however the final bill will be different for each resident as it’s based on both personal assets and income.

Whether you’re looking at low or high level care, expect to pay two separate charges – an accommodation bond designed to help meet the maintenance costs of the facility, and a daily fee for resident care.

High level care facilities aren’t permitted to charge a lump sum upfront bond but may charge an extra daily accommodation fee. Where it applies, the accommodation bond is assets-based (the family home is typically exempt), and facilities are free to charge what they like as long as the resident is left with assets worth $36,000 after paying the bond. For instance, if an aged parent owns $600,000 in assessable assets, a care facility can charge a bond of up to $564,000.

invest time for the right result
Comparing facilities on the basis of price can be time consuming. Each home will ask for personal assets to determine the cost, and from here the bond is usually privately negotiated.

Perhaps the best approach for this difficult area of family life is to talk the issue through.

Like a rental bond, the accommodation bond is repayable once a resident leaves the care facility or passes away. In the interim, the home is allowed to keep all interest earned on the bond as well as withholding a 'retention amount', which acts as a contribution towards the upkeep of the buildings and grounds. The maximum that can be charged here is $299 each month for up to five years.

Residents in aged care facilities are also charged daily living costs. Unlike a bond, this is based on personal income. Seniors who earn less than $721.50* per fortnight (singles rate) will only pay a ‘basic’ fee currently set at a maximum of about $37 per day. 

Self-funded retirees who earn over $721.50 each fortnight will also be asked to pay an additional ‘income tested’ fee, which can be up to $60 per day. By way of example, a senior earning the highest income threshold of around $70,000 annually may be up for living costs of $97 daily comprising the $37 basic daily fee plus the maximum income tested daily fee of $60.

At this stage you could be forgiven for thinking ‘there goes the inheritance’. That’s why anyone considering aged care should get some upfront professional financial advice. It can make a significant difference to the costs and how you’ll meet them.

emotional aspects of aged care
Money aside, it’s never easy for families to broach the topic of aged care. According to a 2006 study by University of Adelaide psychologist Dr Linley Denson, most retirees fail to plan ahead for aged care and many are prepared to risk their health in order to maintain their independence. Family members tend to take the opposite approach, giving the physical health and safety of elderly relatives top priority while failing to take into account their personal wishes.

With this in mind, perhaps the best approach for this difficult area of family life is to talk the issue through, letting senior parents have a strong voice rather than expecting them to simply hand over responsibility for the way they’ll spend the final years of their life. It makes sense to discuss the matter long before aged care is urgently required. This new stage takes some adjusting to, and allowing time for everyone to weigh up the pros and cons will go a long way to making the transition less distressing.

if you or a family member are going through this emotional time an ipac financial care adviser can help.