Respite Care • A person with a home care package cannot be requested to pay the home care package daily care fee while the person is in residential respite care.
Independent Living • What is the legal arrangement • Options here in the Barossa Valley • Providers • How do I find & Access • How much do they cost
Various
Residential Care • Deciding to move into an aged care home is often a time of stress, high emotion, and uncertainty about the future. • Residential aged care is for older people who for a variety of reasons can no longer live at home. • Staff at aged care homes can help with: day to day tasks (such as cleaning, cooking, laundry); personal care; and 24-hour nursing care.
Residential Care • We will be the first to admit – the cost of aged care can be complex. • But what are the first steps? 1. Organise a free assessment with an Aged Care Assessment Team (ACAT) 2. Find the right aged care home 3. Lodge a Combined Asset and Income Assessment 4. Seek independent financial advice (optional)
Residential Care • Finding residential aged care facilities – If you are getting older and need some help, or if you are caring for someone who does, contact My Aged Care. – This can be as simple as calling the My Aged Care contact centre on 1800 200 422 FREE or reading the website www.myagedcare.gov.au – You may also talk to aged care providers of your choice about the process
Residential Care • Residential Care in the Barossa – Tanunda Lutheran Home Inc. (Tanunda) • 117 bed complex – Barossa Village Inc. (Nuriootpa) • 100 bed complex – Wheatfields Inc. (Freeling) • 53 bed complex – Abbeyfield Society Inc. (Williamstown) • 23 bed complex
Residential Care • How much does it cost? – Depending on your financial circumstances, the Australian Government may subsidise a range of aged care services for you. – However, the more you have in assets and/or income, the more you may be asked to contribute towards your accommodation and care. – When comparing aged care facilities, it is important to note that all aged care fees, with the exception of your room, are set by the Australian Government.
Residential Care Up to four layers of costs Basic Daily Care Accommodation Means Tested Additional Fee Costs Care Fee Services Fee • Payable by all • Payment will • Calculated on • Set by each residents at a depend on your combined facility if extra fixed amount. income and income and services are Indexed each assets from the assets on an provided. March and means test. Can ongoing basis. Is September by be either a lump subject to an the government. sum or daily fee annual and or combination lifetime cap. of the two.
Residential Care • Basic Daily Care Fees – Amount is prescribed by the Australian Government, at 85% of the single age pension rate – It is paid by all entrants to residential care, whether age pension recipients or self funded retirees – Currently $47.86 per day – Is updated every 6 months when the age pension is indexed – The fee covers livings costs such as meals, power, laundry etc.
Residential Care • How much will the accommodation payment be? – Depends upon the resident’s circumstances at the time of entry • Could be as little as nothing • Could be up to the published maximum RAD for the facility you want to enter • The amount can be limited by the application of the means testing rules. These rules are income and asset based
Residential Care • Accommodation Payments or Contribution Fully supported residents do not pay either. Their accommodation charges are fully covered by the Australian Government. Partially Supported residents pay an accommodation contribution based on the government’s Means Tested Amount (MTA). This amount may change from time to time in line with changes in your assessed MTA (ie. if your assets or income change) and/or if the facility is classed as significantly refurbished. In any case, the government advises both you and the facility of the amount assessed as payable by you. Unsupported residents will pay an accommodation payment based on the maximum room price as advertised by the provider.
Residential Care • Accommodation Payments or Contribution (continued) • You can choose to pay your accommodation costs by: • a lump- sum style ‘refundable accommodation deposit’ (RAD) • rental- type payments called a ‘daily accommodation payment’(DAP), or • a combination of both. • You will have 28 days from the day you entered care to decide your payment method. • You must pay your accommodation costs by the rental-type payment method, until you decide on your ongoing payment method.
Residential Care • Relationship between RAD’s & DAP’s – Residents can pay their accommodation by RAD or DAP – The prescribed interest rate published and updated 6 monthly by the government defines the relationship between RAD’s & DAP. Currently this rate is 6.22% – For example, the equivalent DAP for a $400,000 RAD is $400,000 x 6.22% = $24,880 p.a./365 Therefore the DAP is $68.16
Residential Care Guaranteed by the Government Counted for Refunded to the means tested resident or care fee estate assessment Refundable Accommodation Deposit (RAD) Not counted for Cannot pay Centrelink/DVA more than means test published price (Pension)
Residential Care • The Means Tested Amount (Singles Rates) • 50% of your income in excess of the “Income free area” (Currently $25,487.80); PLUS • 17.5% of your assets in excess of $46,000 up to $157,987.20 (indexed); PLUS • 1% of your assets in excess of $157,987.20 up to $381,961.60 (indexed); PLUS • 2% of your assets in excess of $381,961.60
Residential Care • The Means Tested Amount (continued) – This calculation is used to determine how much (if any) accommodation payment you must pay if you are a concessionally treated entrant – This calculation is used to determine how much (if any) you will need to pay towards your care costs (in addition to your accommodation payments)
Residential Care • Threshold examples – If your assessable assets are below $46,000 and your income is below $25,487.80, you will not pay any accommodation or means tested fees. You will only pay the daily care fee. – If your income is below $25,487.80 and your assets are less than $157,987.20 you will need to pay an accommodation amount, limited by the means testing rules (currently up to $53.84/ day)
Residential Care • Means Tested Fees – Using the means tested amount formula outlined previously, the entering resident’s means tested amount is calculated; – Deduct the maximum accommodation supplement available from the government (currently $53.84/day); – Any amount remaining is payable as a contribution towards care costs. – These amounts are subject to annual and lifetime caps
Residential Care
Residential Care • Additional Service Fees – Where a resident wants specific additional services whilst in care, the care facility can be negotiated with to have the additional services provided, for an agreed price. – There is no subsidy amount or means testing applicable to these arrangements.
Residential Care • Government Fee Estimator • The government’s website called ‘ myagedcare ’ contains a Residential Care Fee Estimator that will estimate your care fees based on your inputs. • You will need to provide details of your annual income, your financial and other assets, any debts that you have, and details about your family home. If you have a partner, you will need to provide details of your combined income, assets and debts • The Residential Care Fee Estimator and much more information can be found online at the following website address: http://www.myagedcare.gov.au/fee-estimator/residential- care/form
Afternoon Tea - Half Hour - Feel free to chat with any of the presenters - We are back on at 3pm
Case Study Bill & Marg are aged 67 & 66. Bill has just retired. Marg stopped her part time work a few years ago. They own their home in the Barossa. They have no debts & own their car & caravan. Their financial assets are $300,000 of shares & cash held personally, plus Bill has $250,000 of super and Marg has $120,000 of super. They are planning their retirement……
Case Study Asset Situation: Cash & Share Investments: $300,000 Super Savings: $370,000 Home: $350,000 Car & Van: $100,000 Total Assets: $1,120,000
Case Study Income Situation: Investment income: $300k x 4% $12,000 Age Pension income (assets test) $15,340 Super Pension ($370K x 5%) = $18,500 Total Income $45,840 If they need more cash, they can access their investment capital or Super Pensions. They receive a part age pension reduced by the assets test (based on current rules) They pay no income tax, and receive franking credit refunds on their dividend income
Case Study Whilst Bill & Marg like their home, they are not emotionally attached to it. They do want to spend much of the next 10 years travelling. They decide to approach a retirement village to look at an independent living unit. Benefits include worry free maintenance, care of their house whilst they are away travelling, being part of a community with similar interests.
Case Study A local retirement village agrees to have them occupy one of their ILU’s, for an entry fee of $350,000. The retention amount is 30% They fund this by selling their home. They pay no capital gains tax on the sale of their home (primary residence exemption) The 30% retention amortised over their life expectancy of 22 years is $4,772 per year. They will also pay a general service charge of $100/week They have no obligations for rates, repairs & maintenance, insurance (other than their own contents)
Case Study They spend much of the next ten years of their retirement travelling, volunteering & helping family with child care for their grandchildren. As the years go by however, the trips get shorter and less frequent. Marg is not confident driving the car with the caravan on. Bill’s arthritis is making lengthy driving uncomfortable. Eventually they decide to sell the van. They have spent some of their savings during these early retirement years:
Case Study Asset Situation: Cash & Share Investments: $140,000 Super Savings: $220,000 ILU refundable amount (70%): $245,000 Car : $35,000 Total Assets: $640,000
Case Study Income Situation: Investment income: $140k x 4% $5,600 Age Pension income (asset test) $32,422 Super Pension ($220K x 6%) $13,200 Total Income $51,222 If they need more cash, they can access their investment capital or Super Pensions. They receive a part pension reduced by the income test (based on new asset rules) They pay no income tax, and receive franking credit refunds on their dividend income
Case Study Bill’s mobility continues to deteriorate. Marg helps all she can but finds the heavy work in assisting him difficult. They decide to look at getting some help in the home. Bill has an ACAT assessment and is rated as having level 2 care needs. The cost of his care package is worked out with Bill to provide for his needs. In this example, we will assume his care package costs $40 per day. How much will he have to pay?
Case Study To receive the help he needs, Bill will pay the basic home care fee of $9.85 / day (Amount set at 17.5% of the single age pension amount); Plus the lesser of: - His means tested amount; or - The capped amount allowed based on his income; or - The actual care costs
Case Study The means tested amount is determined by Bill’s Income: Deemed Income on $360,000: $5,245 (½ the couples income, deeming rates 1.75% & 3.25%) Age Pension: $16,211 (1/2 the couple’s age pension) Total Income $21,456 If this amount is less than the “Income free threshold “, his means tested fee will be Nil. If it is over this threshold, the means tested fee is ½ the amount exceeding the threshold.
Case Study The income free area is currently $19,780.80 (each for a couple) Bill’s Income is $21,456, so his means tested fee is: ($21,456-$19,780.80) / 2 / 364 = $2.30 per day Bill’s annual cap is $5,146.20 per year (or $14.14 per day). If his income were over $37,726, it would be double this amount.
Case Study To receive the help he needs, Bill will pay the Basic home care fee of $9.85 / day; Plus the lesser of: - His means tested amount ($2.30 / day); or - The capped amount allowed based on his income ($14.14 / day); or - The actual care costs ($40 / day) Therefore his costs will be $9.85+$2.30 = $12.15/day The balance of the costs are paid by the government.
Case Study Bill & Marg continue to live in their ILU home and receive home care according to their needs. From time to time, Bill spends a few short stays in respite care to enable Marg to have a break from caring for Bill. How much will Bill pay for respite care?
Case Study How much will Bill pay for respite care? Respite care is relatively straightforward. Bill has already had his ACAT assessment in order to receive home care, so is able to enter a residential care facility to receive respite care. He pays the daily care fee for each day he is there. This is set at 85% of the single age pension rate, currently $47.86 per day.
Case Study Bill & Marg continue to live in their ILU home and receive home care and respite care according to their needs until their mid 80’s, when unexpectedly, Marg suddenly passes away. Bill is unable to continue to live in the ILU on his own, even with higher levels of home care. He decides to move into a residential care room at the facility where his ILU is located. His finances at this time are as follows:
Case Study Asset Situation: Cash & Share Investments: $110,000 Super Savings: $160,000 ILU refundable amount (70%): $245,000 Total Assets: $515,000
Case Study Income Situation: Investment income: $110K x 4% $4,400 Age Pension income (income test) $20,618 Super Pension ($160K x 9%) $14,400 Total Income $39,418
Case Study How much will Bill pay to enter residential aged care? There are 4 potential costs: - Accommodation costs - Daily Care fees - Means tested fees - Extra Service Fees
Case Study Accommodation costs Bill is leaving his independent living unit, so the agreed amount is refunded to him. This makes his assessable assets: Superannuation: $160,000 Cash & Shares: $110,000 Refunded ILU: $245,000 TOTAL: $515,000
Case Study The care facility has a suitable room for Bill, that requires a RAD of $500,000 As Bill has $515,000 and must be left with his protected amount of $46,000, the most he can pay as a RAD is $469,000. Bill elects to do this. He will pay the remaining $31,000 as a DAP arrangement. This will be $31,000 x 6.22% / 364 = $5.30 per day.
Case Study Daily Care Fees Daily care fees (set at 85% of single age pension) are paid by all residential aged care residents. It is not means tested. The amount is currently $47.86 / day
Case Study Means Tested Fees Entrants to Residential aged care will have their assets and income assessed for means tested fees. The rules are: Income: ½ the income over the income free area; plus Assets: 17.5% of assets between $46,000 & $157,987; plus 1% of assets between $157,987 & $381,961; plus 2% of assets exceeding $381,961
Case Study Means Tested Fees Bill’s income is now: Age pension (full): $22,542; plus Deemed amount on $46,000: $805 Total: $23,347 This is less than the income free area of $25,487.80 Therefore Bill has no income based means tested fee
Case Study Means Tested Fees Bill’s assets are: RAD Paid: $469,000 + Cash: $46,000 = $515,000 His asset based means tested fee is: 17.5% x (157,987.20 – 46,000) = 19,598 + 1% x (381,961.60 – 157,987.20) = 2,240 + 2% x (515,000 – 381,961.60) = 2,661 Total = $24,499 / 364 = $67.30 per day
Case Study Means Tested Fees Bill’s means tested amount is $67.30 / day The first $53.84 (being the maximum government accommodation supplement) is disregarded because Bill has paid a RAD to enter care. His payable means tested fee is $67.30 – $53.84= $13.46 per day
Case Study Extra Service Fees Bill does not require any extra services. He does not pay any extra service fees.
Case Study Add it all up – how much does he pay? RAD upon entry: $469,000; plus DAP amount: $5.30 per day Daily Care Fee: $47.86 per day Means Tested Fees: $13.46 per day Extra Service Fees: $0 Total: $66.62 per day
Case Study How does Bill fund his $66.62 / day in fees? Age pension: $22,542 Interest on cash $46,000 @ 2% $920 Total Income $23,462 Income per day $64.50 His shortfall of $2.12 / day can be paid out of his cash or deducted from his RAD balance.
Case Study Bill Finally passes away a couple of years after entering residential care. His RAD amount of $469,000 is refunded to his estate (less any care fee shortfalls that may have been deducted during his stay)
Planning - General • It is not just about money – you should also plan to meet your other needs as well (Spiritual / Emotional / Relational / Dignity / Legacy…) • In regards to the money, clearly from what you have already seen – the more money you have, the more you will pay! • Remove anxiety about the cost through education and avoid costly errors
Planning - General You cannot look at Age care costs in isolation from other things in your life, eg: – Age pension entitlements – Legacy desires – Family situation – Your wills, POA’s, advanced care directives – Need for security
Planning - General Start Early!
Planning - Asset Deprivation • Most Strategies to pay less age care costs and receive more age pension are centred around reducing assessable assets • In terms of pure finances, if we knew our date of death, we could plan an asset deprivation strategy perfectly! Thankfully we don’t… • Statistically, at age 65, men have life expectancy of age 84, women age 87. It’s an average – half will live longer, half will live shorter
Planning - Asset Deprivation • Other family members are often interested in age care costs and pension entitlements, as it will affect estate value. • Asset deprivation is a balance between improving your financial outcomes, and the loss of security of having more financial means, in the context of uncertainty around how long your capital needs to last. • A practical approach is to base a plan on statistics
Planning - Asset Deprivation • Effectiveness is going to depend upon your financial circumstances. We will consider in the next few slides: • Low asset households • High asset households • Midrange asset households (ie part age pensioners) • Note, everyone pays the daily care fee. Reducing assets is only effective in reducing accommodation payments and means tested fees
Planning - Asset Deprivation • Low asset households – It will be ineffective for low asset retirees, particularly for people with assets so low they already receive full age pension, and are exempt from accommodation payments to enter aged care. – Further asset reduction for them will reduce their cash income, but will not confer any benefit in the form of reduced care costs or increased age pension – Eg. people with no home and <$46,000 of assets
Planning - Asset Deprivation • Low asset households – Retirees with assets of less than $157,987.20 in assets will not be asked to pay a RAD. So if not paying a RAD is important to you, keeping below this threshold would achieve that – The value of a home is valued at this amount (or market value if lower) for means testing purposes, so if you have a home and any assets besides, you are in RAD paying territory. The amount of the RAD is not limited by the retirees’ asset amount.
Planning - Asset Deprivation • High asset households – It will be ineffective for high wealth households where assets are significantly above thresholds where they become eligible for age pension or reduced means tested fees. Earnings lost on deprived assets can be more than age care cost savings or age pension entitlements secured – Caps on means tested fees are relevant for these individuals, as there are annual and lifetime caps on means tested fees
Planning - Asset Deprivation • High asset households – It may be more relevant for these individuals to: • Research and quantify the costs they will bear; • Set a budget and an expectation; • Have a plan for how to fund the age care contingencies; and • Rely on their financial asset resources and the care cost caps to manage the aged care scenario
Planning - Asset Deprivation • Part Age Pension Households – These households can benefit financially from depriving assets – Reducing assets will increase age pension – Reducing assets will reduce means tested fees – In the current low investment return environment, you can actually be better off in terms of household cashflow by having less money, than having more in the part age pension space
Planning - Asset Deprivation • Take a scenario of having $10,000 less dollars: – Lost earnings at 4% = - $400 – Add: age pension assets test increase (post 01/01/2017) = $10,000 / 1000 x $3/fn = +$780 – IF you are in age care: Means tested fee effect: • Assets: $10,000 x 2% (assets over 381,961.60)= +$200 • Income: $10,000 x 3.25% (deeming rate) /2 = +$163 • Income: Additional Age Pension $780 / 2 = -$390 – Overall effect: +$353
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