If you or a family member is considering moving into an Aged Care Facility, it’s vital to receive advice on the financial aspects, and how your circumstances and choices could impact the costs of Aged Care, your assets and estate planning. Below is a case study which outlines a strategy to use Challenger’s CarePlus. What is CarePlus? Challenger’s CarePlus helps to manage aged care costs by providing regular payments for the life of the investor as well as providing the peace of mind that 100% of the amount invested will be paid on death to either a nominated beneficiary or to the estate of the investor…(residents of South Australia receive 100% less stamp duty, currently 1.5%)…
By guest author: Challenger
Donald is 83 and widowed. He was living on his own for some time after his wife passed away, but has become frail with age.
After researching his options with the help of his family, Donald was assessed by an Aged Care Assessment Team as requiring residential care and found a suitable aged care home to move into.
Donald’s chosen room in the residential aged care home has an advertised accommodation payment of $550,000. He agrees to that amount and sells his home to pay the Refundable Accommodation Deposit (RAD) RAD of $550,000. He now has $700,000 in term deposits and $50,000 in cash and wants to explore other strategies for this money.
If Donald leaves his money in cash and term deposits, based on rates and thresholds as at 20 September 2017, his year one estimated Age Pension entitlement is nil. Also, his total aged care fees are $38,631 (consisting of a basic daily care fee of $18,038 and a means-tested care fee of $20,593).
Donald visits a financial adviser to find out what his aged care costs will be and how it will affect his cashflow which includes $5,000 per annum of other ongoing living expenses.
After paying a RAD of $550,000 Donald has $700,000 in term deposits, $50,000 in cash and $5,000 in personal effects.
To pay his ongoing aged care fees and living expenses, provide an inheritance for his children and retain access to some funds.
The financial adviser’s recommendation
The first strategy Donald’s financial adviser considers is to retain his existing portfolio of term deposits and cash.
His financial adviser estimates, if the strategy was implemented, Donald’s total ongoing aged care costs over the next three years are projected to be $115,610. After factoring in his total income over three years, including the Age Pension, there is a total shortfall of $56,087 that will need to be funded.
Donald’s financial adviser explores alternate strategies to help improve this outcome. These include an investment bond within a private trust and an investment in Challenger CarePlus (CarePlus).
His adviser explains that the most appropriate strategy will be one that helps meet his ongoing cash flow and estate planning wishes.
CarePlus is designed especially for those who are eligible to receive Government-subsidised aged care services (including both home and residential care) or who are living in an approved residential aged care facility.
CarePlus provides Donald with a guaranteed regular income for the rest of his life to help cover the costs of aged care and living expenses.
When Donald passes away, 100%