Private equity-backed financial planning firm Centric Wealth has warned that sweeping changes to the aged-care system will add further complexity for elderly Australians and their families, but create opportunities for financial advisers.
The recently legislated aged-care reforms will introduce new carer and pension entitlement rules from July 1, 2014, and make it impossible for some families to cover the cost of care for elderly relatives, Centric Wealth adviser Glen Stander said.
That problem is compounded by the extension of life expectancy rates due to advances in medicine and technology.
Actuaries forecast that the extension of life expectancy could see baby boomers spend 32 years in retirement. The estimated lifespan of baby boomers is now age 92, which is 10 years longer than current average life expectancy.
“An increasing number of people are seeking professional advice as to how they can structure their finances to ensure they can fund the long-term care of their elderly relatives without negatively impacting their own finances or quality of life,” Stander said.
“The current rules for the provision and cost of residential or in-home care services are extremely complex. If they are not properly understood, the financial position of both those being cared for and their families can be significantly impacted.”
According to Centric Wealth, all residents in care need to pay a basic daily fee as a contribution towards their accommodation and living costs. The government has set a maximum basic daily fee of $45.63 per day, which is indexed on March 20 and September 20 each year in line with movements in the Aged Pension.
Conditions apply
Furthermore, those who move into an aged-care home will have their assets and income tested by Centrelink in order for the Department of Health and Ageing to work out the amount of fees that person should pay.
The income-tested fee is another ongoing daily fee which is only paid by aged-care home residents whose total assessable income exceeds the income-free levels, which are currently $936.40 per fortnight for a single person and $918.40 per fortnight for each member of a couple. The maximum income-tested fee you may be asked to pay is currently $72.48 per day.
Certain people will also need to pay an accommodation bond, which will be subject to negotiation between the person and the service provider.
Some of these accommodation bonds can be more than $500,000 depending on the particular aged care.
“Because of the complexity of the aged-care sector, not just in terms of the cost of residential care but also carer and pension entitlements, effective financial planning is key to achieving the best outcomes for everyone involved,’’ Stander said.
“Effective financial planning helps take some of the emotion out of the decision-making process as the key points are agreed well in advance.”
