Q: Mum is 89 and a widow, she is struggling to care for herself. We have been advised that she will need to make the move to an Aged Care facility as home care is not an option. The cost of Aged Care homes varies markedly, our preferred option has a deposit of $725,000 and charges fees daily.  Mum owns her home worth around $1,200,000 home and savings of $105,000 in the bank. She receives the full Aged Pension. Our concern is to ensure mum is comfortable in her final years and can afford the care costs. What should we do?

A: In order to be admitted to an Aged Care facility, your mum will need to be assessed by the Aged Care Assessment Team (ACAT), this will usually be booked by her GP or the hospital.  Once an ACAT assessment confirms your mum requires residential care, you can approach facilities to discuss admission.

Whilst you are deciding on a facility, it is really important to recognize that your mum is entitled to 63 days of respite care. In the first instance, this may be a rehabilitation hospital but may become an Aged Care facility on a trial basis. There is a daily care cost associated with this care but this gives you time to assess the facility.  The 63 days can be extended by a further 21 days in certain circumstances subject to approval from the Department of Aged Care.

Given your mum’s assets, she will be financially assessed as being an unsupported resident.  This is important as she will not be reliant upon finding a place for those with “low means” which are often hard to find and offer limited choice.

Before focusing on the costs, I encourage you to focus on finding a facility that your mum and the family will be happy with.  Once you find the right facility, then the process of working out how to fund her admission can be determined.

Care costs for an Aged Care facility comprise the following; A daily care fee of $51.21 per day which everyone pays (This fee is set at 85% of the Single full Aged Pension).

A means-tested care fee which is determined by your mum’s assets and income.  The fee will vary from $0 to $252.20 per day.  In order to have this amount determined you need to complete a form and lodge this with the Department of Human Services. The type of form and level of detail required will vary depending on whether your Mum is a Centrelink recipient. If the relevant form is not completed your mum may be required to pay the maximum daily fee. This fee is capped at $27,532 per year of $66,078 over her lifetime.

The facility may also charge an extra and additional services fee which applies to premium or extra services.

The final cost for an Aged Care facility is the Refundable Accommodation Deposit (RAD) which covers the cost of accommodation.

It is typically the RAD that is most misunderstood and causes the most concern when planning for Aged Care.  As the name suggests, the RAD is refundable when a resident leaves a facility.  A facility is obliged to repay a RAD within 14 days of the resident giving notice of vacating or within 14 days of being shown a Grant of Probate or Letters of Administration.  The full value of the RAD is refunded unless the RAD has been used to fund ongoing costs.

You have the choice to either pay the RAD in full or choose a periodic payment known as a Daily Accommodation Payment (DAP) or a combination of both. The DAP payment is calculated as a percentage of the equivalent RAD; currently 5.54%.  So if you didn’t pay the $725,000 RAD, your mum would pay $110.04 per day as a DAP.  You need to consider which approach you wish to take.  You have 28 days from the time of signing the admission papers to decide.

You need to seek advice from a qualified adviser in this area to understand what options and rights your mum has and how to manage her finances to get the best outcome possible.  Usually, we recommend seeking this advice before making any major decision like selling the family home.  The sale or renting of the family home may trigger unintended consequences such as the loss or reduction in the Age Pension and also an increase in your mum’s means-tested care fee.  There are various strategies available to reduce the means-tested care fee, maximize Centrelink Age Pension entitlements and manage the future viability of your mum’s care.

Visit www.myagedcare.gov.au  or phone 1800 200 422 for further information on Aged Care services.