Category: Q and A

Q: Can my children lend me the money to pay the RAD? A: The simple answer is yes, but it will impact your cost of care and may cause estate planning issues. Children often lend parents money for the Refundable Accommodation Deposit (RAD) this may be because the parents have insufficient funds, there is an aversion to borrowing or because the Daily Accommodation Payment will cause pressure on the parents cash flow. While it is not an uncommon practice you should be aware of the impacts this loan will have on the cost of care. The RAD is included in the assessable assets for calculating the Means Tested Care Fee. There is no consideration given in the assessment to some (or all) of the money being a loan. The total value of the RAD will be included in the aged care assets test and the MTCF will increase as a result of the loan. Loaning money to pay a RAD can create estate planning issues as the RAD is generally refunded to the aged care resident or their estate. You should seek legal advice about documenting any loan agreement. Alternatively, children meeting the cashflow shortfall, paying a Daily Accommodation Payment

Q: How are assets and income assessed for couples? A: The simple answer is the assets and income of a couple are assessed on a 50/50 basis and the home is exempt while one member is living there. If both members of a couple are entering care timing the move can create very different outcomes. If you are a couple entering Residential Aged Care it’s important to understand how the timing of your move can affect your means assessment.    The general rule of thumb when it comes to assessing income and assets is that each person has a 50% share, regardless of legal ownership. The family home is exempt from assessment while one member is living there.  If you both enter care on the same day you will each have half the value of the home up to the capped amount of $173,075.20 included in your assessable assets.    If you enter care on separate days, the house will be exempt from the first to enter care and half of the house up to the capped amount of $173,075.20 will be assessed for the second.   Depending on the value of the home, other assets and the amount of assessable income, entering care on different

Q: Should we keep or sell the family home? A: The simple answer is it depends. There are both advantages and disadvantages of keeping the family home. It is important to be aware of the special rules that apply to your former home when you move to aged care. For two years from the date you or your partner move out, the former home is exempt from the pension assets test. If the home is rented the rent will be assessable in calculating your pension under the income test. Where the home is retained beyond the 2 year exemption, the home will be assessed at the market value with the non-homeowner asset test threshold being applied. For aged care assets the former home is assessed up to a capped amount of $173,075.20 and the rent is included in the income assessment. *If you who entered care before 1 January 2017 an indefinite asset test and income test exemption can apply for pension purposes if you are paying a Daily Accommodation Payment or Contribution and renting your former home. Other important factors to consider include; the impact on your estate planning wishes, the cost of bringing the home up to standard

Q: When can I claim financial hardship? A: If you are genuinely having difficulty paying for the cost of home or residential aged care can apply and the reasons beyond your control you can apply for financial hardship assistance. If you are suffering from financial hardship as a result of your aged care costs the government may pay some or all of your fees and charges to ensure you can receive the care you need. In determining whether or not you are eligible for financial hardship assistance the government will look at your assets, your income and your essential expenses. To apply for financial hardship assistance you must: Have assets below $36,121 (unless they are unrealisable) Lodge an Assets and Income Assessment (Residential Aged Care) or an Aged Care Fees Income Assessment (Home Care) Not have gifted in excess of $10,000 in the previous year or $30,000 in the previous 5 years. The government will also assess how much money you have after paying your essential living expenses. It is important to be aware that some fees such as extra or additional services are not considered essential expenses. In assessing your hardship application the government will examine if you have

Q:  Can I gift my money/assets away? A:  The simple answer is yes, but be aware of the consequences. The rules around gifting for Aged Care are in line with the pension rules for gifting. The allowed amounts for gifting are: $10,000 in a financial year $30,000 over five years – not exceeding $10,000 in any year. The allowed amounts are the same for singles and couples, i.e. a couple can gift $10,000 or $30,000 combined. *Special rules can apply to gifts in relation to granny flats, farms and special disability trusts. Gifts in excess of the allowed amounts are known as “deprived assets” and are assessed as an asset for 5 years from the date of the gift. Deprived assets are also deemed to earn income for the 5 year period. The asset and income will be used to calculate: Your pension entitlement Your eligibility to be a low-means resident Your means-tested care fee      

Q: Will I need to pay a Means Tested Care Fee? A: The answer is often yes.   The government uses a single formula to determine how much you can be asked to pay towards the cost of your accommodation and care, unfortunately it can be a little tricky to calculate.  The Formula is:  50c per dollar of income above   $28,048.80 p.a (single)   $27,528.80 p.a (couple)  plus  17.5% of assets $51,000 – $173,075.20  1% of assets $173,075.20 – $417,225.60  2% of assets over $417,225.60    Where the calculated amount is more than $58.69per day the amount above this threshold is the Means Tested Care Fee.  Your Means Tested Care Fee is used to offset the funding the government provide to the aged care facility, so your Means Tested Care Fee cannot be more than your cost of care.  There is also an annual limit of $28,338.71 and a Lifetime limit (which includes any amount you paid as an Income Tested Care Fee for a Home Care Package) of $68,012.98.  If you are a Low Means resident you will not be liable for a Means Tested Care Fee unless there is a change to your circumstances.