Timing is Important when Couples Enter Aged Care

• by Rachel Lane, Principal of Aged Care Gurus

Moving into aged care can be expensive – emotionally and financially. The natural instinct for many couples who both need care is to move together, on the same day. From an emotional point of view this makes perfect sense: being separated at a time of such significant change may seem overwhelming. But it is important to understand how the timing of your move will impact on your income and assets assessment.

The general rule of thumb when it comes to assessing income and assets for a couple is that each person is considered to have a 50 per cent share, regardless of legal ownership. The family home is exempt from assessment when a protected person is living there — a protected person includes a partner, dependent child, or in some cases a carer or close relative.

It's natural for couples who both need aged care to want to go in together.

This means that if both people enter care on the same day, half the value of the home (up to the capped value of $165,271) _{(20 March 2018)} would be included in each person's assessable assets. If the house is valued at more $330,542, this would mean that neither are eligible to be treated as a low means resident.

However, if each member of the couple enters care on separate days, the fact that one partner is still living at home would exempt the value of the house from the assessable assets of the first person to move into care. Depending on the value of other assets, this could mean that the first person to enter care would qualify as a low means resident.

Members of a couple timing their entry to aged care can make a difference to their means assessment.

Let's look at an example.

Jack and Shirley have a house valued at $800,000. They also have $100,000 in investments and $10,000 in personal assets. They each receive the age pension. The aged care facility they would like to move to has a market price Refundable Accommodation Deposit (RAD) of $450,000.

If Jack and Shirley enter care on the same day they would each have assessable assets of $220,271, made up of $55,000 plus $165,271 (the capped value of the home). Both would need to pay the market price for their aged care accommodation.

But if Jack were to enter care on Monday and Shirley on Tuesday, Jack's assessable assets would be only $55,000, because the home would be exempt. Jack would qualify as a low means resident. Jack's Daily Accommodation Contribution (DAC) would be $3.13 _{(20 March 2018)} a day; his equivalent lump sum Refundable Accommodation Contribution (RAC) would be $19,780. _{(20 March 2018)}

When Shirley enters care, her assessable assets would be $220,271, and she'd need to pay the market price. Jack's classification doesn't change.

However, the DAC (and equivalent RAC) are re-calculated when a resident's partner enters care. For a low-means resident, the DAC can rise to a maximum of $56.14 _{(20 March 2018)} a day. They may also need to start paying a means-tested care fee.

So, in Jack and Shirley's case, Jack's DAC will increase to $56.14 a day, or an equivalent lump sum of $358,236, and a small Means Tested Care Fee of $1.51 _{(20 March 2018)} a day when Shirley moves in.

While this strategy may seem like a straightforward winner, you will need to look at a few other factors to see whether or not it is really a strategy you want to employ. The first, and most important, is whether the facility would accept a low means resident, and whether you'd be happy with the accommodation on offer under this scenario. Next you need to consider how you intend to fund the cost of care; if you decide to sell your home, paying a lower lump sum for your accommodation may not be ideal when you factor in the impact on your pension entitlement. Last, but not least, you'll need to consider the estate planning consequences, as any lump sum accommodation payment will generally be refunded to the estate.

Moving into aged care involves complex calculations. Make sure you get specialist advice to help you get it right.

Steve Jenkosky trading as Golden Age Advisory is an Authorised Representative of Synchron AFS License No. 243313.
Unless specifically indicated, the information contained in this BLOG post is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek personal advice from a financial adviser.