Why aged care finances & emotions don’t mix

Why aged care finances & emotions don’t mix

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It’s often a highly emotional time when someone in the family is about to enter a residential aged care facility. Trying to deal with emotional factors while figuring out how to pay the aged care costs can be a challenge for tens of thousands Perth families each year. There’s a word of caution here: be careful of your emotions when dealing with aged care costs.

After more than a year since the implementation of ‘Living Longer, Living Better’ reforms, the industry is generally pleased and agree that these have revolutionised the aged care system. However, there are still many Perth residents and families who are surprised & caught out by its complexity.

Payments like ‘RADs’ and ‘DAPs’ are now must-know terms for families who are preparing for aged care. They also need to fill-out a 145-question income and asset assessment form. For families who are still trying to figure out whether to sell the family home or not, this often is a confusing and stressful time.

Aged care costs and what they are for

In your entry to aged care, you need to pay a refundable accommodation deposit or RAD. Formerly known as accommodation bond, this works like an interest free loan to the aged care. This will be refunded to you when you leave the aged care.

RADs often cost as much as a house, which is why new residents may need need to raise up several hundred thousand dollars cash for their RAD if they do not intend to sell the house.

For those who cannot pay RAD upfront, there is what they call DAP or daily accommodation payment. DAP is currently charged at a 6.14 per cent interest rate.

While the DAP seems reasonable, paying it is much like servicing an expensive loan. When you are old and ageing (or one of your family members is), worrying about aged care funding is probably the last thing you want to do.

Should you sell the family home?

Families always find it hard to sell the home because of the attachment they have developed through the years. Adult children, in particular, can often find it hard to let go. If their elderly parents aren’t likely to return, selling the home might be an easier decision to make – but it could in turn be a worse financial decision.

Also, if the family is valued just a little bit more than the RAD, it may seem harder to justify holding on to the family home. However it is important that adult children understand there are other financial options available for ‘bond’ payment such as reverse mortgage which could help reduce the over all the cost of entering aged care. Making the quick decision to sell the house when you are most emotional, can deliver a very poor outcome for the family.

Getting aged care financial advice

In these circumstances, aged care financial advice can be a sound investment.  The calm, and measured financial analysis that an adviser provides can help steer the family through a very turbulent period and save you a substantial sum in terms of overall costs and fees for accommodation. Your aged care financial adviser can inform you of the possible implications of keeping or selling the family home. Your decision may also affect your aged pension, tax obligations, and cash flow so it’s important to avoid costly mistakes.

For a stress-free entry to aged care, specialist aged care financial planning is recommended. Perth Aged Care Financial Advisers offers a free initial consultation. Call us today so we can help you too: 1300 472 232.

Regards, Malcolm