Financial plan not all about the client

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The current cost of aged care services, combined with complex carer and pension entitlements rules, means an increasing number of families are unable to pay for the care services their elderly relatives need.

Centric Wealth Adviser, Glen Stander says the current aged pension is equivalent to around 30% of an average male wage, which is not enough to fund residential or in-home care services for people aged 65 or over.

“That is why 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.

“The current rules for the provision and cost of residential or in-home care services are extremely complex,” said Stander. “If they are not properly understood, the financial position of both those being cared for and their families can be significantly impacted.”

Anyone who moves into an aged care home generally has their assets and income tested by Centrelink, so the Department of Health and Ageing can work out what amount of fees that person should pay.

The Government has set a maximum basic daily fee of $45.63 per day, which is indexed on 20 March and 20 September each year in line with movements in the aged pension.

The income tested fee is another ongoing daily fee which is only paid by aged care 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 is currently $72.48 per day.

They may also have additional costs for bond, which can be more than $500,000.

“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,’’ said Stander.

New aged care reforms will be effective from 1 July 2014 and will be phased in over a number of years. They will likely add more complexity and further decision making for those thinking about aged care.

“From a financial perspective, an increasing number of our clients’ are concerned about what type of investment strategies they need to put in place to adequately fund the aged care requirements of either themselves or their parents,” says Stander.

He says that key concerns planners need to think about include:

  • Clients often do not want to ask their parents if their Will is up to date or suggest a Power of Attorney agreement
  • Many are concerned they may not fully understand their duties and obligations if they are appointed executor of their parents’ estate
  • One of the most commonly asked questions is whether an account based pension or annuity is more beneficial in terms of being able to maximise Centrelink or DVA benefits and whether this pension or annuity income may affect their aged care fees

Stander says that it is important to start talking about aged care arrangements well in advance, because effective financial planning will help take some of the emotion out of the decision making process.

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