The journey from your home to a place where you can receive higher care and nursing can be a huge lifestyle change, and there’s lots of information to absorb and decisions to make. One of the big questions you might have is how much will it cost, and can I afford it?
Putting aside the emotional upheaval of leaving the family home, the move to aged care requires careful consideration of how you can best fund your move, your care and have enough left over to continue a comfortable lifestyle you deserve.
The financial details can be complex so it’s important to seek professional advice on how any decisions may affect the overall position of the person who is entering aged care and, if applicable, your partner, family, and any dependents.
At Freedom Aged Care, we recommend speaking to legal and financial advisers who specialise in aged care, who can assess your individual circumstance and help you decide on which options are a good fit for your situation.
Let’s take a very brief look at some of the factors for you and your adviser to consider in regards to costs...
Aged care costs
The cost of aged care varies depending on the type of property, the amenities and services offered. The first question you should ask yourself is, what type of accommodation am I looking for?
For example, traditional residential aged care (aka nursing homes) are typically communal buildings where residents may have their own private room with ensuite, but still have limited privacy and independence. 'Home care communities', like Freedom Aged Care, are an alternative to traditional nursing homes. In home care communities residents live in their own self-contained homes within a community environment, all the while having 24/7 access to a full range of services and care options; from low care that enables them to live independently, right up to high care and round-the-clock palliative care. Nursing homes will have a different fee structure to a home care community like Freedom. However, there are some general costs, usually a combination of upfront and on-going costs you need to be aware of with both options.
For a traditional nursing home, an up-front accommodation fee is required to enter the facility, usually in the range of $350,000 to $600,000, but this can vary considerably depending on the location of the property and facilities.
For a ‘home care community’ such as Freedom Aged Care, the model is a bit different. Residents purchase their new home under a 99-year lease (similar to a retirement village model). Similar to nursing homes though, the purchase price can vary depending on the location of the property and the facilities at the community.
Ongoing charges cover daily living expenses and meals, which can be calculated weekly or sometimes monthly. These fees apply to both nursing homes and home care communities and compare to what you would normally pay for living expenses in your own home, while having access to a range of amenities and activities.
In a home care community, residents also pay for personal care-related fees. Aged care is tailored to everyone based on individual requirements, with as little or as much care as a resident needs. The level and hours of care are adjusted as care needs change over time. In a home care community such as Freedom, this care is delivered in the privacy of the resident's own home within the community by a team of personal carers and nurses. At Freedom Aged Care, the ongoing costs operate on a cost recovery basis - meaning these services are provided without deriving any profit from them.
Daily accommodation payment (DAP)
The DAP is a daily payment contributing to the cost of your accommodation and is paid periodically i.e. fortnightly or monthly. This is a non-refundable payment. The DAP is calculated based on the refundable deposit (that you pay up front for your accommodation before moving in) multiplied by the maximum permissible interest rate, and divided by 365 days.
Funding the upfront costs
Some people may have sufficient savings and investments to cover the upfront accommodation fee (be it a refundable fee for a traditional nursing home or the cost of purchasing a unit in a home care community).
To enable them to pay the upfront costs, some people may have to look into the possibility of selling the family home. Selling the family home can be the simplest option but freeing up cash in this way may have wider implications, such as affecting pension eligibility. Due to the complexity of this financial decision, it’s important to seek professional advice on how this choice will affect you and any loved ones.
Alternatives to selling the family home
What to do when you can’t cover the upfront cost with savings or by selling other assets/investments...
Some financial institutions offer ‘reverse mortgage’ type loans for funding aged care, which allow people to access the equity in their home without selling the property. No payments are needed until the end of the loan term, although some products do allow repayments during the term. The loan is paid back within a certain time frame after the person leaves aged care or passes away.
Funding the ongoing costs for your aged care
To help pay for the ongoing costs, the government may cover some people's fees, but depending on your personal situation you may need to pay part or in some cases all the ongoing costs.
Whether, and how much, a person pays is determined by their income – from sources such as pensions, rental properties and other investments – and the value of their assets.
What is included when determining assets?
- Cash in the bank
- Term deposits
- Managed funds
- Non-financial assets such as home contents, investment properties and superannuation balances
A home's value is fully excluded in some cases, such as when the partner of the person entering aged care still lives in the property. If this is not the case and a home is part of the asset test, only part of the value of the family home is included in the assets calculation. This capped amount increases with inflation each March and September. Since March 20, 2018, it has been just above $165,271.20, or the home’s market value if it is worth less than that amount.
Home Care Packages
You or your loved one may be eligible for the Australian Government's Home Care Package subsidy, which can be used toward the cost of services provided by an approved Home Care Provider. Freedom Aged Care is an approved Home Care Provider, meaning that when you live in one of their home care communities, you can choose for your subsidy to go toward care they provide or use your package to boost your care with additional services.
Seeking a legal and/or financial aged care adviser
The aged care journey can be complex and the above points are just some of the topics you will find yourself navigating, we have only just skimmed the surface in this article. Finding the best strategy to fund a move to aged care very much depends on your financial circumstances, which is why it’s a good idea to seek professional financial advice when doing your research and before finalising your decision. Finding the right adviser is just as important. Before you engage the services of an adviser, there are some questions you may want to ask:
- What licenses, credentials or other certifications do they have?
- Do they specialise in dealing with aged care financial issues? What experience do they have in aged care finance?
- Will they provide you with some sample plans?
- How much do they charge?
- Will their advice be in writing?
- Will they deal with Department of Veterans’ Affairs or Centrelink on your behalf?
- Is the service a once-off or an ongoing service?
Recommended links to aged care advisers: