With a rapidly aging population, aged care will become a huge issue across Australia in the next decade, touching most people whether it’s themselves, a spouse, parent or elderly relative needing care. It’s often left to the family to make arrangements, and this can happen quickly after the person has had a fall or illness. The Aged Care system can be quite daunting. It is not easy to understand how it all works, and recent changes to the funding of care have not made it any easier. So let’s take a quick look.

The first step in the process is an assessment with the Aged Care Assessment Team (ACAT). They will assess the care needs. Their assessment may be that the person simply needs home care, or to provide the person access to residential aged care. Assuming the person is going into residential care, the next step is to research and visit different care facilities. A good starting point is a visit to the My Aged Care website to find facilities in your area.

There is a big difference in standards and costs, as well as the level of care required. Research and visits are important to find options that suit the person’s needs and budget. Once suitable facilities have been found, consider applying to a few. On application you’ll receive a quote for the cost of care. This is known as an Accommodation Payment. This amount can be negotiated with the facility. The Accommodation Payment can be paid as either:

• An upfront lump sum payment – known as a Refundable Accommodation Deposit (RAD). This is refunded to the person’s estate upon death (with deductions if applicable), or;
• A regular payment – known as a Daily Accommodation Payment (DAP). This is calculated as a fixed rate of interest on any lump sum payment that you choose not to pay.

You can choose either of these options, or a combination of both. The best option will depend on the individual’s situation. In addition there are non-negotiable government regulated fees:

• A basic fee – everyone in residential aged care pays this, set at 85% of the single aged pension.
• A means-tested care fee – paid on top of the basic fee. The amount is dependent upon the person’s income and assets. Various financial decisions can influence this cost.

Though subject to annual and lifetime caps, aged care can be very expensive. It’s important to manage the impact with good decisions. Financial issues that should be considered include:

• What about the family home? If the home is occupied by a partner or dependent, it is exempt from means testing. Otherwise, it can be rented out and its value will be capped at $154,179 for assets test purposes.
• How should any money be invested? Are there investments that could improve the situation?
• How should the Accommodation payment be made, by lump sum or regular payment?

Your Elston adviser can help you understand the options, comparing different scenarios and providing an appropriate strategy to reduce the financial burden. The right advice is crucial in reducing the cost and stress at this difficult time.