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Aged-care advice often well worth the cost

The most common phrase I hear when I tell people to seek financial advice about entering aged care is “I can’t afford advice”.

In reality, most people can’t afford not to get advice, with the cost normally significantly outweighed by the benefits.

In a classic example of this, one reader contacted me, and I referred her to a specialist adviser, following my column “You need to know how to avoid an aged care OMG letter”.

In the column, I spoke about the two-year pension asset test exemption that applies to the family home when someone enters aged care and the special exemptions that can apply for people who entered aged care before January 1, 2017.

This particular reader had been looking after her mother’s finances since she entered aged care in 2013 but had never sought advice.

When she received the OMG letter a few years ago she figured there was nothing she could do about the resulting pension reduction and increase in aged-care costs. That was until she read the column.

To have these special exemptions apply, you must be paying towards your aged-care accommodation by daily payment AND renting the house.

In the column I explained that people who entered aged care before January 1 last year are in the unique position of being able to keep and rent their former home, with the asset and income (rent) being exempt from their pension entitlement indefinitely.

To have these special exemptions apply, you must be paying towards your aged-care accommodation by daily payment AND renting the house.

For people who entered care before January 1, 2016, and meet the above criteria, the rent would also be exempt from aged care means testing.

So what was the outcome? Well, in this case, her mother receives the War Widows Pension, which is not means tested and so was not affected by the changed assessment but the Income Support Supplement that is paid in addition to the pension increased by about $700 a year.

On the other side of the transaction, her mother’s aged-care costs also changed.

She had previously paid her accommodation bond in full but to meet the exemption criteria she needed to make a daily payment.

A small refund of part of her bond was arranged and a daily payment of $166 a year became payable. The exemption of the rent from the former home reduced her mother’s daily income tested care fee from almost $18 a day to a little over $2 a day, saving about $5,600 a year.

In this reader’s own words “the value is some $6,000 a year . That means she has unnecessarily paid some $25,000-$30,000 since admission into care on 29 November 2013”.

While a saving of about $30,000 is nothing to be sneezed at, if her mother was in receipt of the age pension the savings would have been significantly more.

And of course there are more factors at play than just pension and aged-care costs. Tax and estate planning implications also need to considered.

The bottom line: specialist aged-care advice costs money, not seeking it could cost you even more.

Source: - by Rachel Lane – January 12, 2019

Disclaimer: This article is not legal or personal financial advice and should not be relied on as such. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. You should obtain financial advice relevant to your circumstances before making investment decisions.



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