While many people plan for retirement, often counting down the years, months and days, very few plan for aged care. Instead, aged care is usually not thought of until a crisis unfolds, which can make the decision rushed, emotionally difficult and very expensive. Understanding the options available and being able to quickly calculate and compare options for someone before they need care can help them make better decisions and save them substantial amounts of money and stress.
Without a doubt, one reason people avoid planning aged care is because they don’t want to move to a “nursing home”. So advisers should educate their clients that “aged care” doesn’t equal “nursing home”. In fact, in 2019, 1 million of the more than 1.3 million Australians who received aged care, received it at home.
Start with the home
A plethora of accommodation options are available to senior Australians, including apartments, granny flats, retirement villages, land lease communities, and residential aged care — each with their own legal and financial implications.
People are often adamant about staying in the family home. But there can be significant downsides to this, such as growing isolation if they are no longer driving or have been widowed. And when care is needed, there are practical concerns: most homes are not built with the view to providing care, and while some modifications are simple and inexpensive, others may cost tens of thousands of dollars, or simply be impossible.
If an older person moves in which one of their children, they may establish what Centrelink calls a “granny flat right” — but only if the older person has no legal ownership in the property. Granny flat arrangements can have enormous implications both emotionally and financially.
The whole family will need advice to ensure that they understand the impact for the older person on pension entitlement, other government benefits and future costs of aged care; for the homeowner on stamp duty, appropriate insurances and tax implications; and the estate planning considerations (for parent/s and children), including any amortisation or residual value of monies paid to create the granny flat itself. An agreement will be needed that clearly outlines the rights and responsibilities of each party and contemplates likely changes to the situation, such as what would happen if married children divorced, became ill or passed away, and the circumstances under which the agreement ends.
Retirement villages and land lease communities are becoming a favoured choice for many retirees. They often provide a strong social network, and from a lifestyle point of view people can strike a balance between doing what they want and are able to do for themselves with the ability to access support and sometimes care. Many newer villages are built with the intention of catering to care needs, whether now or in the future. The buying power of these communities should not be underestimated, and when it comes to care delivery their efficiency is second only to an aged care facility, as carers are able to move from one home to another in a matter of metres.
When looking at retirement communities, make sure you know whether they cater to “ageing in place or are “care free” — in the latter type of community it is not uncommon for the contract to state that a person who requires ongoing care must leave the community.
You will need to guide most clients through the crucial considerations about accessing care, and at what point they may need to move again. Does the client require care now? What care needs can be reasonably anticipated in the future? Would they rather live somewhere that can support them as they age, or kick up their heels for as long as possible — then move again if needed?
Of course, for some clients they will simply decide to move into residential aged care. Sometimes, this is the right decision when it comes to safety and wellbeing. While residential aged care is means tested, that doesn’t mean that it’s affordable the means test can create perverse outcomes for people who are classified as low means as well as those who are deemed to be able to afford the market price.
Next, crunch the numbers
Most financial advisers will discover the financial implications associated with the various accommodation choices and care options are difficult to determine without the right specialist tools. Not only do you need to know the accommodation costs, pension and rent assistance implications and the cost of care (including any means tested amount), but also how decisions today could impact the future.
For example, when considering retirement villages, it is common for the client to be looking at either different villages or different payment options within one village. Each typically involves different exit fee calculations, shares of capital gain or loss, reinstatement costs, marketing and selling fees and buyback timeframes. Financial advisers need to consider and model these, along with pension, rent assistance, cash flow, tax, home care package costs, private care costs, estate planning and the client’s ability to fund residential aged care in the future, should it be needed.
Defining aged care advice narrowly as helping people moving into residential aged care is a poor business practice that may lead to poor advice. Quality aged care advice must be based on the individual client’s needs and objectives. And to do that effectively, you need specialist education, tools and resources.
Find out more with September’s FREE Aged Care Gurus webinar
Aged Care Gurus will be hosting a free webinar on 23 September at 12.30 – 1pm that looks at the value of aged care advice and provides a demonstration of the their Advice Builder. Register here
About the author
Rachel Lane is the Principal of Aged Care Gurus. Rachel writes regular columns on retirement living and aged care for the Sydney Morning Herald, Melbourne’s Age and the Brisbane Times, has co-authored a number of books, including the best-seller Aged Care, Who Cares? and often speaks on radio and television.
Rachel has both professional and personal experience navigating retirement living and aged care: for many years as a specialist financial adviser, and in more recent times helping her grandmother – affectionately known as “Ducky”– to navigate her way through a retirement village, a home care package, and a few respite stays in aged care.
Rachel holds a Masters in Financial Planning which included a research report on aged care in Australia titled “Aged Care; The struggle to provide Quality, Equity, Efficiency, Sustainability and Choice”.