While the preference for many people will be to age gracefully at home and remain financially self-supporting, the reality is this may not happen. According to Federal Government figures, one third of all men and half of all women aged 65 and over can expect to go into permanent residential care at some time later in their lives, with 82 being the average age on entry for both men and women.
Unfortunately, it is often as a result of illness or injury that people come face-to-face with the aged care system and its financial impact. The shock and suddenness of this change adds to the confusion which many people have about how aged care works, how much it will cost, and what they can afford. By talking about these issues with a financial adviser — either when you and your elderly relatives take the initiative to plan for the future; or as soon as you know a relative has to go into care — you can work with the adviser to develop an approach that suits your family’s circumstances.
Talking openly
If it is possible to do so, one way to avoid some confusion is to have an open discussion with your older relatives about the aged care issues which concern them. Once you have these initial discussions, you can then continue the conversation with a financial adviser to make sure you have covered all the important points. Key to these discussions might be the details of their will and who is best suited to be their power of attorney to make financial choices and decisions about their care once they become incapable of doing so.
Another important question is whether there is enough money to cover all their living expenses. To answer that concern, it is important to assess their financial needs and expenditure, and understand how these can be met in the future through existing investments, retirement savings or income support through Centrelink. It may be important to organise a visit from an aged care assessment team (ACAT) to assess the appropriate level of funded care and support services, especially if that support allows them to remain at home.
Making choices
If the choice is to stay in their own home then consideration might be given to whether the house needs some modifications and how they might be funded. Or it may make more sense to downsize and free up capital to meet other likely expenses such as an accommodation bond for an aged care facility. A re-structure of assets could maximise Centrelink pension entitlements and health care benefits, which then takes pressure off life savings. The sale of some assets may generate capital gains tax, while others such as the family home may be exempt from tax.
These can all be complex issues, and your financial adviser will work closely with lawyers and other professionals when their skills are required to resolve specific questions.
By making the choice to talk with a financial adviser, you can help prepare the way ahead for your elderly relatives and for the whole family.
By Steve Salvia
Steve is the CEO of Southern Financial Strategies, Accounting Focus and 10X The Business X Factor Perth Central East. A Plumber & Gas Fitter by trade and experience in the Mining & Construction industries, Steve has been a Financial Planner since 1994. He has completed his Advanced Diploma of Financial Services (Adv Dip FS(FP)), was honoured as ‘WINNER’ of the prestigious AFA Financial Adviser of the Year Award 2010 (Finalist 2009)(National Award), recognised as ‘WINNER’ AXA WA State Adviser of the Year 2010.
This editorial provides general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your particularly investment objectives, financial situation and individual needs. Charter Financial Planning and its authorised representatives do not accept any liability for any errors or omissions of information supplied in this editorial. Charter Financial Planning Limited ABN 35 002 976 294 AFS Licence No. 234665