Common Myths about Aged Care Fees

Released: 29 Jul 2010

I (Scott Keeley) spend much of my day speaking with the families of people who are preparing to enter Aged Care Facilities.  This is a particularly traumatic time for most family, and this trauma is only compounded by the complex nature of the various fee structures.  In my contact with clients, often the same questions come up.  There is the opinion that the cost of Aged Care is far too expensive, and unaffordable for those who own their own home, but have little in the way of other assets.

I thought I'd provide here a list of the most common myths that I hear that relate to the cost of Aged Care.


My ongoing fees will only be 85% of my pension!

While the Basic Daily Care Fee is linked to 85% of the full Age Pension, additional fees can also be charged.  These include Daily Income Tested Fees, Accommodation Charges (for high level care) and potential Extra Services Fees.  As a result, the total ongoing fee may be a lot higher than 85% of the pension.


I will have to sell my home to pay for the Accommodation Bond!

Maybe, but not necessarily.  While this may be the most commonly explored option, renting the home and organising to pay the Accommodation Bond via periodic payments may also achieve an affordable outcome.


Only the rich who can afford to pay a large Accommodation Bond can get into a low level care facility!

The Government does in many cases subsidise the costs associated with providing Aged Care for those residents who are unable to afford large Accommodation Bonds.  Furthermore, Aged Care Facilities are required to set aside a certain percentage of beds for "concessional" or "assisted" residents, ensuring everyone has equal access to care.


The Accommodation Bond is dead money!

A large proportion of money paid as an Accommodation Bond is refunded to the resident when they leave the Aged Care Facility, or to their estate when they pass away.


I'd be better off giving everything away so I can avoid or lower the fees!

As with most things in life, money buys choice.  Having assets at your disposal should ensure you can choose an Aged Care Facility that is close to family, can provide the required care, and that you are happy with.  Giving away assets may not improve your position.  It can have significant implications from a Centrelink and an Aged Care Fee perspective.  Seek specialist advice before considering this!


If we set up a family trust, we can avoid or lower the fees!

While this may be sometimes true, again specialist advice is required before considering this.  The utilisation of family trusts may have some impact in reducing Daily Income Tested Fees, however I'm yet to be convinced of the merit.  The Daily Income Tested Fee is only reduced because the resident's income is reduced!  Sure, you pay less fees, but only because you receive less income!  Robbing Peter to pay Paul?


Summary

Too much emphasis can be placed on keeping the full rate of Age Pension, or paying the lowest possible ongoing fees for Aged Care.  In my mind, this focus is misplaced.  Overall cashflow is far more important (regardless of the source).  Let us help you find the best outcome.  Crunching the numbers, and being aware of all of your options, should ensure that the financial aspects of entering Aged Care are far less intimidating.

Scott Keeley  -  enquiries@wakefieldpartners.com.au
(08) 8333 2488