Q: My mother has recently entered into an Aged Care facility and even though her health has deteriorated, her mind remains quite sharp. She has paid a deposit to the Aged Care facility from the sale proceeds of the family home. She has not revised her Will in the last 20 years, and I am worried about what might happen when she passes.
A: This is a concern for a lot of children when their elderly parent enters into an aged care facility. The deposit paid to the aged care facility is known as a Refundable Accommodation Deposit and when your mother passes away it will be repaid into her estate.
If your mother has not updated her Will in the last 20 years, then it might be time to do so. However, this will be dependent upon such as factors as follows:
- Does the Will reflect her current circumstances?
- Who is the executor?
- Is the person aware of their role as executor?
- Are they still alive and willing to complete the role?
- Has there been a change in their beneficiaries circumstances (such as a divorce or death)?
- Does she have the assets she has bequeathed to a particular person (e.g. the vintage family car to a particular grandchild)?
Even if your mother wishes to update her Will, however, has lost her legal capacity, then, unfortunately, the opportunity may have passed. Your mother (or Enduring Power of Attorney) needs to engage the services of a solicitor who is an estate planning specialist and determine whether she has legal capacity.
As part of this process, you can consider engaging a financial adviser who is an estate planning specialist. The financial adviser can facilitate the process, work with your mother to determine what she values when passing on her legacy and whether it is appropriate to place funds in trust (such as a Testamentary Trust) for the next generation.
We have seen adult children being included in the process. This can deliver some excellent outcomes for the family and the family member can understand and explain the reasons why particular decisions are being made. Should your mother feel uncomfortable doing this, she can have the solicitor explain certain aspects of the Will and the reasons for including trusts.
One of the more interesting aspects of Estate Planning and a client’s aged care journey is the sale of the family home. As you mentioned earlier, the sale proceeds, in this case, have been used to fund the Refundable Accommodation Deposit for your mother’s aged care facility. This deposit will be refunded upon her death to her estate, which again highlights the need to review and update your Will when entering into care.
We recently had an interesting case whereby a client entered into care and she sold her home to fund the deposit. Under the clients Will, the family home would have been split evenly amongst her children. The unique difference was any remaining other assets would be given to the local Church. After referring the client to a solicitor who is an estate planning specialist within our professional network, we were informed that upon the death of the client, the refunded Accommodation Deposit would be paid into the estate, and subsequently to the Church. This is not what the client intended, and subsequently, the clients Will was updated.
Whilst this situation is very unique, it does highlight the fact that a change in circumstances can warrant a revision of how you pass on your legacy when entering into an Aged Care facility.
So what is next?
For your mother, consider your options as to the best way for her to update her Will. As mentioned, you can engage a financial adviser who specialises in Estate Planning and Aged Care to facilitate the process in conjunction with a solicitor who is an Estate Planning specialist.