Don't gamble on the future
Family decision...Dianne Douglas (right) with her parents Hilda and Tony.Photo: Craig Sillitoe
Decisions over aged care for loved ones are both emotional and financial, writes Bina Brown.
Aged care facilities have come under fire lately with reports of mistreatment of residents and poor practices. This adds stress to the already challenging process of finding the best nursing home or hostel for loved ones who can no longer care for themselves at home.
While the system is under pressure, there are good facilities around.
To find the most suitable residence and secure a position, you need to be armed with the right information.
No one likes to think about living in an aged care facility but the reality is that one-third of all men and half of all women aged 65 or over can expect to go into permanent residential care later in their lives.
The federal government regulates the aged care industry by allocating the number of places, setting funding levels and controlling fees.
The underlying position is that every Australian is entitled to aged care, irrespective of their financial circumstances. In practice, most people have to pay for their preferred choice and extra services they may need or want.
There is a distinction between retirement villages and aged care facilities. The former is considered a lifestyle decision people make when they feel it is appropriate, considering their health and other personal and social factors.
A move into aged care accommodation is generally involuntary. Three-quarters of people enter aged care from hospital following an accident or illness.
Aged care facilities are categorised as low care (hostel), high care (nursing home) and high care with extra services.
They can vary enormously depending on who runs them, their age and the types of funding they receive from government and individual residents.
FINDING AND FUNDING AGED CARE
To get into an aged care facility, individuals must be assessed by an Aged Care Assessment Team, which will determine the level of care a prospective resident requires.
An assessment of the person's assets and income will determine whether they have to pay an income-tested fee on top of the basic daily care fee and the amount of an accommodation bond or charge.
The financial assessment is not compulsory but if the information is not provided, aged care fees will be charged at the highest rate.
People with assets valued at more than $37,500 who need low-care hostel accommodation are required to pay an accommodation bond, a daily care fee and potentially an extra income-tested fee.
The bond may be set by the facility and can be anywhere between $100,000 and $600,000 depending on its location, age or the types of services it offers; or it can be negotiated based on calculations of the level of assets held by the prospective resident.
The average bond is about $270,000 in Victoria and higher in NSW. The bond is like an interest-free loan to the hostel while the person is a resident there. The balance is refunded upon leaving.
Anyone entering a nursing home, which provides a higher level of care than a hostel, is required to pay an accommodation charge determined by the Department of Health and Ageing, rather than an accommodation bond.
The exception is where the high-care facility is recognised as offering extra services, such as daily newspaper delivery or a choice of meals, which are available for an additional cost to the resident.
In this case, the facility can charge an accommodation bond instead of an accommodation charge.
In addition to the accommodation charge, there is the daily care fee and, potentially, an income-tested fee.
The maximum total of these three fees could add up to about $123 a day or $45,000 a year, depending on an individual's financial circumstances and care needs.
A senior adviser at Partners' Retirement Planning and Investment Advisors, Patrick Barry, says that where an accommodation bond is to be paid by a resident in a low-care hostel or a nursing home offering extra services, the individual must be left with a minimum of $37,500 in assets.
From March 20, the basic daily care fee in low and high care was increased to $38.65 a day for everyone, whether they had $5 million in assets or 5¢ to their name.
Barry says the daily income-tested fees for low and high-care accommodation apply when someone's income exceeds $812.50 a fortnight. This fee may equal 41.67 per cent of any assessable income in excess of $812.50 up to a maximum of $62.11 a day.
SELLING THE FAMILY HOME
The prospect of having to sell the family home or another cherished property is one of the biggest fears for many people having to consider aged care, says Val Nigol, a director of specialist advice firm Financial Freedom Solutions and the co-author of Aged Care Homes, the Complete Australian Guide.
However, the family home doesn't always have to be sold.
"If it is low-care accommodation and you need to finance the bond, then quite often people assume they have to sell the family home, because it is a few hundred thousand dollars, but there are alternatives," Nigol says.
The average bond is about $270,000 in Victoria and higher in NSW. The bond is like an interest-free loan to the hostel while the person is a resident there. The balance is refunded upon leaving.
Anyone entering a nursing home, which provides a higher level of care than a hostel, is required to pay an accommodation charge determined by the Department of Health and Ageing, rather than an accommodation bond.
The exception is where the high-care facility is recognised as offering extra services, such as daily newspaper delivery or a choice of meals, which are available for an additional cost to the resident.
In this case, the facility can charge an accommodation bond instead of an accommodation charge.
In addition to the accommodation charge, there is the daily care fee and, potentially, an income-tested fee.
The maximum total of these three fees could add up to about $123 a day or $45,000 a year, depending on an individual's financial circumstances and care needs.
A senior adviser at Partners' Retirement Planning and Investment Advisors, Patrick Barry, says that where an accommodation bond is to be paid by a resident in a low-care hostel or a nursing home offering extra services, the individual must be left with a minimum of $37,500 in assets.
From March 20, the basic daily care fee in low and high care was increased to $38.65 a day for everyone, whether they had $5 million in assets or 5¢ to their name.
Barry says the daily income-tested fees for low and high-care accommodation apply when someone's income exceeds $812.50 a fortnight. This fee may equal 41.67 per cent of any assessable income in excess of $812.50 up to a maximum of $62.11 a day.
SELLING THE FAMILY HOME
The prospect of having to sell the family home or another cherished property is one of the biggest fears for many people having to consider aged care, says Val Nigol, a director of specialist advice firm Financial Freedom Solutions and the co-author of Aged Care Homes, the Complete Australian Guide.
However, the family home doesn't always have to be sold.
"If it is low-care accommodation and you need to finance the bond, then quite often people assume they have to sell the family home, because it is a few hundred thousand dollars, but there are alternatives," Nigol says.
Passing the hat around the family is one option if the rest of the family want to retain the property for their own use in the future.
Borrowing against the property using a product such as a reverse mortgage is another; or there may be other investments such as shares that could be sold to finance the bond.
Nigol says the size of the accommodation bond and the way it is to be paid is generally negotiable with the facility. It may be possible to pay in instalments, for instance.
Of course, there are situations where it may make sense to sell a property. The beneficiaries may not want it and selling would eliminate questions over who would have to look after the property.
The marketing manager at Melbourne-based Lifetime Planning, Ken Mitchell, says people considering downsizing the family home need to be aware of the effects on the age pension. "If downsizing increases a couple's assessed assets by $500,000, the pension could reduce by $19,500," Mitchell says.
"The cost of moving could be as much as $50,000 and, for an elderly couple, the trauma of moving from the home of a lifetime could be significant."
Centrelink can provide information about how an individual's pension may be affected.
PLANNING AHEAD
Unfortunately, people can't always plan ahead for their aged care needs but, where possible, they should view them from short-term and long-term perspectives.
"In the short term, it is important for people to be well organised with powers of attorney, wills and good records of their assets and liabilities," Mitchell says.
"In trying to look ahead more than one or two years, the situation is more difficult because of the seemingly constant changing rules. For example, assets held in trust were previously excluded from personal assets and accommodation bonds have only recently become government-guaranteed.
"Changes like these have caused very significant changes to financial planning, which could not be anticipated with any great degree of certainty."
Perhaps the biggest factor making it hard to plan is that most people entering aged care come via a hospital following an accident or illness. All of a sudden, a person can go from living in their own home, possibly independently, to needing full-time care.
Although people can just "knock on the door of a facility and ask for a bed", such an approach is highly unlikely to produce the best solution, Mitchell says.
Borrowing against the property using a product such as a reverse mortgage is another; or there may be other investments such as shares that could be sold to finance the bond.
Nigol says the size of the accommodation bond and the way it is to be paid is generally negotiable with the facility. It may be possible to pay in instalments, for instance.
Of course, there are situations where it may make sense to sell a property. The beneficiaries may not want it and selling would eliminate questions over who would have to look after the property.
The marketing manager at Melbourne-based Lifetime Planning, Ken Mitchell, says people considering downsizing the family home need to be aware of the effects on the age pension. "If downsizing increases a couple's assessed assets by $500,000, the pension could reduce by $19,500," Mitchell says.
"The cost of moving could be as much as $50,000 and, for an elderly couple, the trauma of moving from the home of a lifetime could be significant."
Centrelink can provide information about how an individual's pension may be affected.
PLANNING AHEAD
Unfortunately, people can't always plan ahead for their aged care needs but, where possible, they should view them from short-term and long-term perspectives.
"In the short term, it is important for people to be well organised with powers of attorney, wills and good records of their assets and liabilities," Mitchell says.
"In trying to look ahead more than one or two years, the situation is more difficult because of the seemingly constant changing rules. For example, assets held in trust were previously excluded from personal assets and accommodation bonds have only recently become government-guaranteed.
"Changes like these have caused very significant changes to financial planning, which could not be anticipated with any great degree of certainty."
Perhaps the biggest factor making it hard to plan is that most people entering aged care come via a hospital following an accident or illness. All of a sudden, a person can go from living in their own home, possibly independently, to needing full-time care.
Although people can just "knock on the door of a facility and ask for a bed", such an approach is highly unlikely to produce the best solution, Mitchell says.
He recommends the use of a placement agency, which would be aware of the facilities that can cater for the person's specific requirements and can match those to other factors such as location, finance and psychosocial needs.
"It can be difficult for families in stressful circumstances to balance all the aspects of the drama of moving to aged care and the assistance of a placement agency can be a godsend," Mitchell says.
The executive manager of placement agency Tender Living Care, Denise Tomaras, says part of the service is working out with the prospective resident or their family how close they want to be to loved ones and what sort of lifestyle they want.
Lifestyle decisions include whether they want to be able to go out for dinner and whether they want a single room or would be happy to share.
"We show people up to eight facilities," Tomaras says. "Some of them may have waiting lists but we may be able to influence these depending on a person's needs and whether the facility has an appropriate bed.
"When we see people they are generally in crisis. My advice is: don't wait for a crisis. Try to narrow your preferred facilities down to even two places and be armed with some knowledge of how the system works.
"It is great to see people planning because their choices become wider. But if they are in a crisis, we can kick in pretty quickly."
CASE STUDY
Proximity and a high level of care were at the top of a long list of must-haves for Dianne Douglas and her family when they started the process of looking for an aged care facility for her father Tony.
Tony had been a fit man in his 80s before a series of strokes left him in need of full-time care.
"We had six weeks to find a high-care facility that was close to my mother and siblings. While we wanted to find a place with nice facilities, we also became very aware of the importance of the staff that worked there and how the place was run," Dianne says.
The checklist included how many staff a particular facility had, what their qualifications were and whether the staff members were mostly permanent or agency workers. This was to get a sense of whether people were floating through or full-time carers for the residents.
So daunting was the task of comparing about a dozen possibilities that Dianne engaged Melbourne-based Tender Living Care to assist in finding a bed and working through the financial and bureaucratic maze that goes with helping someone into aged care.
"People don't realise how extraordinarily stressful the whole process of finding somewhere and then moving someone you love in is until they have to do it. It is something you don't think about until it happens," she says.
"It is a combination of knowing that someone's whole lifestyle has changed and they have lost complete control of how they want to live."
http://www.smh.com.au/news/business/money/planning/dont-gamble-on-the-future/2010/04/06/1270374189659.html?page=fullpage#contentSwap2
"It can be difficult for families in stressful circumstances to balance all the aspects of the drama of moving to aged care and the assistance of a placement agency can be a godsend," Mitchell says.
The executive manager of placement agency Tender Living Care, Denise Tomaras, says part of the service is working out with the prospective resident or their family how close they want to be to loved ones and what sort of lifestyle they want.
Lifestyle decisions include whether they want to be able to go out for dinner and whether they want a single room or would be happy to share.
"We show people up to eight facilities," Tomaras says. "Some of them may have waiting lists but we may be able to influence these depending on a person's needs and whether the facility has an appropriate bed.
"When we see people they are generally in crisis. My advice is: don't wait for a crisis. Try to narrow your preferred facilities down to even two places and be armed with some knowledge of how the system works.
"It is great to see people planning because their choices become wider. But if they are in a crisis, we can kick in pretty quickly."
CASE STUDY
Proximity and a high level of care were at the top of a long list of must-haves for Dianne Douglas and her family when they started the process of looking for an aged care facility for her father Tony.
Tony had been a fit man in his 80s before a series of strokes left him in need of full-time care.
"We had six weeks to find a high-care facility that was close to my mother and siblings. While we wanted to find a place with nice facilities, we also became very aware of the importance of the staff that worked there and how the place was run," Dianne says.
The checklist included how many staff a particular facility had, what their qualifications were and whether the staff members were mostly permanent or agency workers. This was to get a sense of whether people were floating through or full-time carers for the residents.
So daunting was the task of comparing about a dozen possibilities that Dianne engaged Melbourne-based Tender Living Care to assist in finding a bed and working through the financial and bureaucratic maze that goes with helping someone into aged care.
"People don't realise how extraordinarily stressful the whole process of finding somewhere and then moving someone you love in is until they have to do it. It is something you don't think about until it happens," she says.
"It is a combination of knowing that someone's whole lifestyle has changed and they have lost complete control of how they want to live."
http://www.smh.com.au/news/business/money/planning/dont-gamble-on-the-future/2010/04/06/1270374189659.html?page=fullpage#contentSwap2
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