Key Takeaways
- The 28-Day Decision Rule: Residents have a mandated 28-day window after moving into a facility to decide whether to pay for their room via a Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP), or a combination of both.
- Dynamic Fee Structures: Residential care fees are not fixed and typically fluctuate over a 2–5 year period as asset values, cash flow, and Age Pension entitlements change.
- Assessment Accuracy: Errors on Services Australia or Department of Veterans’ Affairs forms often lead to incorrectly calculated means-tested fees and lengthy delays in financial processing.
- Home Sale Pressure: Hasty decisions made under pressure often lead to unnecessary or undervalued property sales. Taking the full deliberation period allows for a more strategic approach to asset management.
- Projected Cash Flow: Successful aged care planning requires financial projections that account for shifting costs over several years rather than focusing solely on day-one entry fees.
Navigating the transition into residential aged care can be a daunting process, often fraught with complicated rules, family conflicts and tight timeframes. Such circumstances can easily lead to costly mistakes that are challenging to rectify. This article sheds light on three common pitfalls and offers tips to avoid them.
Mistake 1: Rushing your aged care payment decision
One of the most significant expenses you'll encounter is the cost of your room, often quoted in hundreds of thousands of dollars. However, instead of a lump sum, you may opt to pay a daily fee.
Signing contracts under pressure can lead to hasty decisions, potentially locking you into a quick home sale. Take your time to understand your options and make an informed decision. Providers are mandated to allow 28 days post-move-in for payment deliberation, affording you the chance to seek advice and prepare. You should use this time to review your broader financial planning strategy.
Mistake 2: Only focusing on day 1 costs
While it's crucial to comprehend the fees payable on your first day in residential care, this is merely the starting point. Your fees evolve over time, influenced by decisions made post-entry and changes in your circumstances. Ensure you anticipate fee variations over the subsequent 2-5 years, with projections showing anticipated shifts in fees, age pension, cash flow, and asset values. Long-term retirement planning is essential to ensure your capital lasts as long as your care needs do.
Mistake 3: Filling in Services Australia forms incorrectly
Services Australia needs to review your financial position to calculate your fees. To enable this assessment, you need to complete some forms and update Centrelink (or Veterans’ Affairs) records.
If you don’t fill in the right form, or make mistakes with the information provided, your fees might be incorrectly calculated or cause long delays with the assessment. This can lead to unexpected back-payments or missed entitlements that are difficult to recover later.
How an accredited aged care adviser can help
Even if your situation seems simple, there are so many aspects to consider in working out the best financial strategy. Consulting with an accredited aged care adviser provides peace of mind, ensuring you've made prudent decisions to sustain adequate cash flow while safeguarding your estate's value.
If you wish to explore your options or seek tailored advice, please don't hesitate to contact our office on 02 4325 0884 to arrange an appointment.
Find an Aged Care Specialist
The rules surrounding aged care are complex and mistakes are often permanent. Our team can help you navigate the system and protect your family's assets. Find a Morgans adviser today to start your planning.
Frequently Asked Questions
How long do I have to decide how to pay for aged care?
You have 28 days from the date you enter a residential aged care facility to decide your payment method. During this window, you can choose to pay the room cost as a lump sum (RAD), a daily payment (DAP), or a combination of the two.
Do aged care fees increase over time?
Yes. Aged care fees can change based on your income and assets. If your house is sold or your investment values shift, your means-tested care fee may be recalculated. Annual and lifetime caps do apply to these fees.
What is the difference between a RAD and a DAP?
A Refundable Accommodation Deposit (RAD) is a lump sum payment that is generally refunded when you leave the facility. A Daily Accommodation Payment (DAP) is a non-refundable periodic payment, similar to interest, paid if the room cost is not fully paid as a lump sum.
Can I move into aged care without selling my home?
Yes. You are not legally required to sell your home to move into aged care. Options like the Daily Accommodation Payment (DAP) or the government’s Home Equity Access Scheme can sometimes help fund care without an immediate property sale.
What happens if I make a mistake on my Centrelink aged care forms?
Incorrect information on an aged care financial assessment can lead to you being overcharged for care. It can also cause significant delays in processing your subsidies, which may result in a large lump-sum bill once the error is eventually corrected.
Sophie Doyle (AR#000470612) is a Retirement and Aged Care Specialist at Morgans Financial Limited (Morgans AFSL 235410 / ABN49 010 669 726); with a passion for assisting people make informed financial decisions, as they navigate their way through retirement and aged care.
Disclaimer: While every care has been taken, Morgans Financial Limited makes no representations as to the accuracy or completeness of the contents. The information is of a general nature only and has been prepared without consideration of your individual objectives, financial situation or needs. Before making any decisions, you should consider the appropriateness for your personal investment objectives, financial situation or individual needs. We recommend you see a financial adviser, registered tax agent or legal adviser before making any decisions based on this information. Current as at 12 March 2024.
