You may have heard that there are ways to protect an aged care resident’s assets from nursing home costs.
A resident’s nursing home costs are based on some fixed costs and means tested costs. In some cases, assets can be structured in a manner that will ensure favourable assessment of the means tested costs.
Here is a run down of the costs that a nursing home resident may need to pay while in aged care or upon entering aged care, and whether or not “protecting” or “hiding” assets can help with such costs.
Refundable Accommodation Deposit (RAD)
This is a lump sum payment made towards the aged care facility, similar to a bond. Each nursing home will have a different RAD value and will usually have several RAD amounts depending on the room chosen. A Daily Accommodation Payment (DAP) is payable on any unpaid RAD, based on an interest rate – currently 6.01% p.a. (as a 1 August 2016).
The only way to reduce a RAD/DAP is if the resident has limited means (e.g. assessable assets below $149,423.20) whereby the RAD/DAP is replaced by a Refundable Accommodation Contribution (RAC) / Daily Accommodation Contribution (DAC). The RAC/DAC is generally lower than the advertised RAD and, unlike the static RAD, it is revised every 3 months based on up-to-date income and assets.
Basic Daily Care Fee
This fee is non-negotiable and the same for every nursing home resident. You can’t protect your assets from this fee. The rate of the fee is 85% of the single Centrelink Age Pension and therefore increases every 6 months.
Extra Services Fee
This fee is charged by Aged Care homes for the extra services they provide to their residents. This might include alcohol, cable television, etc. Just like the Basic Daily Care Fee, this fee is not means tested and therefore is unable to be reduced through the restructure of income and assets.
Means Tested Fee
The Means Tested Fee is the fee that can potentially be drastically reduced through the restructure of income and assets and by protecting assets from nursing home assessment through various aged care financial planning strategies. In many cases, the reduction can amount to thousands of dollars every year. There are a variety of ways that this can be done through gifting, certain income stream products, pre-purchasing and so on, but it is very highly recommended that your specific circumstances are discussed with an authorised financial planner prior to implementing any strategies that may assist with reducing asset assessment and improving nursing home costs.