The Family Home
A question we are regularly asked is ..do I sell my family home to pay aged care expenses ?
In most cases this question is not as simple as it appears.
Unfortunately the decision to sell or not to sell a family home is often made a stressful time. There is often input from; the family, aged care homes, Centrelink & others which is not always helpful. There is no correct answer as it is based on your individual circumstances, more so now with the changes to means care fee testing in Aged Care. Under the old rules simply selling the house, pay the bond, cover the fees may not be the best solution.
Under the new rules everyone entering aged care must pay a bond, either as a lump sum RAD (Refundable Accommodation Payment), a rental-type payment DAP (Daily Accommodation Payment) or a combination of the two. The DAP will have an interest component attached (currently at 6.36%). Crunching the numbers will be different for everyone depending on things such as the house value, the RAD amount and the value of any other assets and sources of income.
Another factor that now must be considered is the way the means tested care fees are calculated. You need to factor in a basic daily fee for living costs such (meals & laundry) and an additional means-tested care fee based on an assessment of your income and assets. There also can be a fee for optional services.
Things to consider:
- Value of all your assets (particularly the home)
- All sources of income
- RAD your facility wants to charge
- Approx. Rental return (residence) vs current maximum allowable rate facility can charge.
Plan of Attack
So, the time has come for Mum or Dad to move into aged care. Before you enter into a fire sale of the family home, this is what you need to do:
1. Find an aged care facility that offers the right standard and level of care
2. Is it affordable? For anyone on a full age pension, 85 per cent of the pension will go towards the basic daily fee and nothing else is payable. Everyone else faces an income and assets test.
3. What is your preference – keep or sell the house?
4. Work through your financial options. Don’t rely on the aged care provider to do this. Consider seeking advice from an independent financial planner who specialises in aged care.
You have four weeks to make a decision about whether to pay a lump sum bond called a refundable accommodation deposit (RAD), a rental-type payment called a daily accommodation payment (DAP), or a combination of both.
We aim to empower the individual to achieve their life goals through innovative financial solutions
Suite 402, Level 4, 88 Foveaux St, Surry Hills NSW 2010
PO BOX 1899 Bondi Junction NSW 2022
Ph: (02) 9211 0111