Recently Jack and his wife Irene had just been diagnosed through an ACAT assessment to require full time residential care. Irene was currently in respite care, and Jack wanted some advice on how best to fund it.
Initial Circumstances were:
- Had a property which was also a small farm, (50 odd acres) with an adjoining investment property, and the investment property was worth approx. $500,000.
- They had about $500,000 in a SMSF, that was invested through an adviser mostly in shares, and the current adviser did not provide Centrelink or Aged Care advice.
- Some funds in the bank but not a lot.
- RAD (Refundable Accommodation Deposit) on the new facility was in the region of $400,000
Their questions were should they sell their home (Small Farm) , the shares in the SMSF, the investment property, or some combination of these.
In addition, they were concerned about the ongoing costs for care for Irene, and Jack’s costs to live, and since he had never received any Government assistance or pensions in the past, how long would the money last.
Our initial step was to complete the Aged Care Means Testing Centrelink form, which given the various assets was an exercise Jack admitted he couldn’t complete alone. We assessed his situation and after in-depth discussions with Centrelink we gained an exemption on the farm under the hobby and time on land clause to get it exempt from assessment for Aged Pension. A fantastic outcome for Jack and Irene.
Our recommended Strategy;
- Pay a part RAD initially with the intention of paying the full RAD.
- Due to Centrelink rules around land ownership for more than 20 years and it being used for farming (it being deemed that, given the age and health of the client, effective use of the land was being made), the whole of the home and land (curtilage) was considered exempt for Centrelink purposes even though the land size exceeded the normal accepted size of 5 Acres.
- Sell the investment property and use these funds to pay the RAD in full.
- Retain funds in their SMSF and start to consider the risk profile of the investments to insure adequate income can be produced for their future spending needs.
- We would send Centrelink an update once the investment property sold and the full RAD was paid.
The outcome was:
- Jack stayed in his home which he was happy with given all the stress of the changes happening with Irene.
- The RAD was paid in full from the proceeds of the investment property sale and there was additional funds remaining to fund some of the ongoing costs.
- Jack and Irene qualified for Centrelink pension for the first time ever, much to his surprise, and this funded the ongoing costs for Irene. Some $20,000 plus thousand a year.
- There is now sufficient cash from the property sale and Centrelink payments to provide living expenses for Jack and Irene allowing them to retain their funds in their superannuation to meet ongoing living expenses.
This was another excellent example of the value of quality financial advice when it comes to funding aged care solutions for our loved ones. If Jack and Irene had not sort advice they would have missed out on Centrelink which alone would have cost them $20000 per year which is a substantial amount in any bodies financial affairs.
If you have a loved one which may be requiring assistance in Finding the best solution for aged care in the future please get in contact with us at https://totalagedcaresolutions.com.au/contact/
