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Planning for Aged Care Seminar

Margaret Harrison – Signpost Aged Care Services

and Cameron Seidel – UniSuper Advice

Tuesday 15 August 2017

1. Living and care options in retirement

• Granny flat arrangements• Retirement villages• Home care

2. Aged care

3. Case study

4. How can UniSuper Advice help you?

Agenda

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1. Living and care options in retirement

• Granny flat arrangements• Retirement villages• Home care

2. Aged care

3. Case study

4. How can UniSuper Advice help you?

Agenda

NOT IF, BUT WHEN…

• Living longer• Fewer informal

carers

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Living and care options in retirement

1. Family home – nil care support2. Granny Flat Arrangements3. Retirement Villages4. Family home – home care support5. Aged Care Residential Facilities (hostels or nursing

homes)6. Supported Residential Services

Granny Flat Arrangements

Accommodation provided in exchange for a transfer of assets.Does not need to be a separate flat. Can be

• Parent moves into child’s home

• Child moves into parent’s home

• Parent and child move into new home together.

Can transfer assets up to certain aged based limits withoutpenalty.

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Granny Flat Arrangements

Practical and emotional considerations

• Care to be provided

• Holidays

• Contribution to outgoings

• What happens if care needs can no longer be met

Retirement Villages

Accommodation for over 55’s regulated under State or Territory legislationThings to look out for:• Care services • Check the rules or contract to see what you are getting; and• Like minded residents • Established or financially sound provider;• Arrangements for moving to onsite aged care• Costs - they are expensive

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Retirement Villages Costs

Costs vary. Commonly:• Entry fee (purchase price)• Monthly service fee

On exit:• Deferred management fee – up to 40%• Refurbishment costs• Sales and legal fees

Lifestyle choice not an investment.

Home Care

1. What are the options for home care?2. What kind of assistance is available?3. How do I access these services?4. What will it cost me?5. How do I work out which is best for me?

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What are the options for home care?

1. DVA services for DVA Gold or White Card holders

• Call VHC Assessment Agency on 1300 550 450 • or contact Department of Veteran Affairs on 133 254• May ask for a contribution of $5 - $10 per week

depending on services

What are the options for home care?

2. Subsidised home care package

• MyAgedCare website or 1800 200 422• Need to be 65 years old or over and be assessed as eligible.

Assessment is free and conducted first over the phone and then in your home

• Waiting times for these services can be considerable.• Lower care packages (Level 1 and 2) can be more expensive than

private services if not a full pensioner.

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What are the options for home care?3. Private services

• Contact a provider – web search of providers in your area.

• Considerable number of different models for care• Differing pricing structures• If looking to get subsidised home care package, check

whether provider is an approved provider.

Taking care of the carer

• If the carer does not stay rested and healthy will not be able to fulfil their role

• Take regular short breaks

• Prepare for longer breaks

• Take time to maintain friendships, contact with family and active in your own interests

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Aged Care Residential Facility

Residential accommodation and care subsidised and regulated by the Commonwealth Government

• Care provided according to needs, usually ageing in place

• ACAT/ACAS assessment required (myagedcare.gov.au)

• Fees and charges are regulated

Aged Care Residential Facility Costs

• Accommodation Payment (bond or RAD). Government guaranteed and returned when resident departs; and

• Care and service fees:• Basic daily fee 85% full age pension;• Means tested care fee $0 to $244 per day. Yearly and lifetime

cap;• Additional fees• Safety net for those who cannot afford a bond.

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Aged Care Residential Facility

Things to look for:

• Locations

• Can I afford it (or can they afford me)?

• Happy staff and residents

• Food and activities

• ‘Fit’ and feel

Aged Care FeesThe fees payable in residential aged care are regulated by government and may depend on:

• The aged care service you select

• Your level of assessable assets and income

• The range of fees are shown in the diagram below:

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• Mary has been ACAS assessed as requiring permanent residential care

• Mary has appointed her children Greg and Lucy, as her Powers of Attorney

• Greg and Lucy have consulted Signpost and have signed a Residential contract to place Mary in Cherry Tree Aged Care which has a Refundable Accommodation Deposit (RAD) of $440,000

Case Study: Mary, widowed, age 82

Assets Owner Current Value Annual Income

Home Mary $1,000,000

Home contents (Centrelink value) Mary $10,000

Total Lifestyle Assets $1,010,000

Cash savings Mary $47,000 $1,175

UniSuper Flexi Pension Mary $976,067 $48,585

Total Investment Assets $1,023,067 $49,760

Case Study: Mary’s assets

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What should Mary do?

Emotional/family considerations

Potential value and use of former home

Ability to generate cashflow

Expected capital growth on home

What is the better option? It depends on …..

Costs to make home ‘rentable’ and maintain

Estate planning issues

Advice is the key!

• Greg and Lucy (as Attorney’s for Mary) would like to review options to pay for Mary’s aged care accommodation and understand the financial impact of each option

• They have indicated that they do not wish to sell Mary’s home

• They would like to minimise ongoing care fees where possible

• They would like to determine whether Mary has sufficient cash flow to meet her ongoing costs of care and living expenses

Case Study Mary

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Mary’s starting cash flowDescription Annual Income

Income:

UniSuper Flexi Pension (Tax free) $48,585

Interest from bank savings (@ 2.5%) $1,175

Total: $49,760

Expenses:

Basic daily care fee ($49.07 per day) $17,911

Means tested care fee ($59.15 per day) $21,589

Extra Service fee ($12 per day) $4,380

Daily accommodation payment ($69.07 per day) $25,212

Personal living costs $8,600

Home expenses (to maintain main home) $10,000

Contingencies $7,400

Total $95,091

Shortfall ($45,331)

Mary’s Aged Care funding options

1. Fund the Refundable Accommodation Deposit (RAD) via a daily payment (DAP)

2. Redeem $440,000 from Mary’s Flexi Pension to pay the RAD in full

3. Redeem $220,000 from Mary’s Flexi Pension to pay 50% of the RAD and pay the balance via a DAP

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Mary’s RAD funding optionsAssets Option 1 Option 2 Option 3

Home $2,000,000 $2,000,000 $2,000,000

Lifestyle assets $10,000 $10,000 $10,000

Flexi Pension $976,067 $536,067 $756,067

RAD paid as lump sum $0 *$440,000 *$220,000

Cash $47,000 $47,000 $47,000

Total assets – starting position $3,033,067 $3,033,067 $3,033,067

Estimated assets after 5 year (present value)

$2,640,572 $2,657,933 $2,649,440

*RAD deducted from Mary’s Flexi Pension

Mary’s cash flow for the 3 optionsOption 1 – Pay full DAP

Option 2 –Pay full RAD

Option 3 –Pay 50% RAD

Flexi Pension $93,917 $65,536 $78,142

Interest income $1,175 $1,175 $1,175

Total Income – Year 1 $95,092 $66,711 $79,317

Expenses – Year 1

Personal expenses & contingencies $16,000 $16,000 $16,000

Daily Accommodation payment $25,212 $0 $12,606

Basic Care fee $17,911 $17,911 $17,911

Means tested care fee $21,589 $18,420 $18,420

Extra Service fee $4,380 $4,380 $4,380

Property expenses $10,000 $10,000 $10,000

Total Expenses Year 1 $95,092 $66,711 $79,317

Net cash flow Year 1 $0 $0 $0

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Mary’s cash flow for the 3 options

Recommended option:

• Redeem $440,000 from Mary’s UniSuper Flexi Pension and pay the Refundable Accommodation Deposit (RAD) in full

• Retain the balance of Mary’s Flexi Pension and draw sufficient income to meet her cost of living (approx. $65,000 in the first year)

UniSuper Advice Benefits for Mary• Mary’s long term net asset position may be slightly higher by paying the full RAD rather than incurring the

ongoing interest cost of the DAP

• The ‘return’ on paying the RAD is known whereas the investment return of the Flexi Pension is subject to market volatility

• The full RAD (less any discharge fee deducted by the facility) would be payable to Mary’s estate and distributed according to her Will should she pass whilst in the Aged Care facility

• By removing $440,000 from Mary’s UniSuper Flexi Pension to pay the RAD, Mary will reduce potential death benefits tax of 17% that her children may pay upon receiving her super death benefits

• Mary’s means tested care fee is estimated to reduce by $8.68 per day compared to her day 1 position

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The value of adviceReview entire

financial situation

How to pay for accommodation

• Sell home?• Pay full RAD?• Rent home and pay

full DAP?• Pay part RAD / DAP?

Generate reliable cash flow to cover

daily fees

• Annuity• Investments• Age pension• Rental income

Optimise financial position

Estate planning implications

Advice is key

Payment option

Lump sum (RAD)

Daily fee (DAP)

Sell or keep the home

Personal/

family preferences

Financial implications

and cashflow

Added strategies

Reverse mortgages

Annuities

Funeral bond

Gifting?

Estate planning and implications

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Avoid rushed decisions

THANK YOU