Aged Care


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Initiative Title: Aged Care
Category: Residential Services Initiatives
Description:

Manly Hospital Site – Aged Care

Age Care was the highest priority preference identified by the Manly Community for the Future Manly Hospital site.  This comes as little surprise because of the acute shortage of affordable aged care facilities in our local area.   There used to be 3 or 4 Aged Care facilities in the local Manly area and today there is only one (Uniting Wesley Heights Manly).  Many of our elderly come to a stage in their life where additional support is either required at home or at a specialist care facility that is affordable for the aged.  When one or both of these is found to be too expensive or not available locally, they are left with little choice but to consider a move out of their beloved community (where they have lived for much of their life) to a strange area often way from home, family, friends and their local community.

Working out how our ageing population within our Manly Community plan for their inevitable need for aged care in later life can be not only difficult but very stressful.  Similarly, working out how children of an elderly parent fund care for their mum/dad is not straight forward.   This is especially true if the need is brought about by a sudden event that renders the elderly parent incapable of looking after themselves(s) any more (for example following an event where a Health Department ACAT assessment deem them no longer able to look after themselves).   In other words, needing to obtain Aged Care for loved ones quickly can be a costly, trying and complex affair.   Those designated as their custodians need to be aware of all the options available to them. Unfortunately many of these services are not available within our Manly Community at a cost that can be afforded.  Even when you begin dealing with all the various parties involved in Aged Care you tend be confronted with individual silos of care, not holistic care.   The elderly and their families end up needing to be the glue that pulls all this complexity together in a meaningful way to obtain a best result for their elderly loved one(s).

Without a doubt, until a loved one either chooses to move to an Aged Care facility of their own accord or is forced to move because of some event (stroke, heart attack, dementia, etc.), staying at their home is typically the best and preferred option for all parties involved.  Ever since the Federal Government’s 2014 Aged Care reforms, families have had to find increased funds to move elderly relatives into Aged Care.  The number of people over 80 year old is currently one-in 26, increasing to one-in 18 by 2030.  This trend will make matters more and more challenging over time, as we live longer and grow in numbers.  

This is one of the main reason why our early building assessment focused upon the potential re-usability of some existing Manly Hospital buildings.   The current lack of available and affordable aged care within our Manly Community is the main community driver behind this endeavour.  The other main area of community concern is around the complexity and uncertainty around government funding for Aged Care. 

Funding Aged Care

In recognition of the fact that most of our elderly would prefer to have their aged care happen at home, in February 2017 the Federal Government introduced “Consumer Directed Care” (CDC).   This is a package specifically designed for our elderly (supported by a carer if necessary) who want to stay at home.   Four (4) levels of support are available (ranging from $8,000 to $50,000 per year), with some able to access supplementary funding (eg. those with dementia, etc).  Eligibility is determined by a government “Aged Care Assessment Team” (ACAT), who determine the level of support qualified for, identify approved support providers to work with our elderly, their family and cares to create an individual support plan. 

  • ACAT level 1 would apply to an elderly person with basic domestic care needs for assistance from an approved carer for say 3 hours per month (costing $20) and capped at $8,000 per year.  Assistance like house cleaning, shopping, meal preparation and visiting health practitioners, etc. 
  • ACAT level 2 is for low level care needs, capped at $14,500 per year providing around 4 hours of carer time at home per week for providing the likes of mobility equipment, skin management, etc.
  • ACAT level 3 is for intermediate care needs, capped at $32,500 per year for around 8 hours of carer time per week for delivering more complex care in the home, like assistance with bathing, showering and regular visitations to health care professionals
  • ACAT level 4 is for high level care needs, capped at $49,500 per year for around 12 hours of cater support per week for delivering complex and much repeated (almost daily) support from a variety of professional carers including modifications to the home directly or short term respite care

Where an ACAT assessment determines that care support above level 4 is required, the elderly person and family members (especially those with Enduring Guardianshio) involved would be required to seek Residential Aged Care from an approved Aged Care facility (like that proposed at our Manly Community-driven Health Care Facility – McHCF).   In other words, the elderly person concerned can no longer stay at home. 

As things stand today there are two useful legal arrangement that should be considered as our elderly require more intimate support from their family:-

  1. Enduring Power of Attorney for when an elderly relative is deemed not fully capable of dealing with their own financial affairs.   In such cases the elderly are able to appoint one or more persons (eg. mature members of the family) to make informed decisions regarding their finances that can be shown to benefit the elderly person involved
  2. Enduring Guardianship for when an elderly relative is deemed not fully capable of dealing with their own life style and standard of living.  In such cases the elderly are able to appoint one or more persons (eg. mature members of the family) to make informed decisions regarding their accommodation, health and life style decisions that again can be shown to benefit the elderly person involved

When any ACAT assessment is done, this enables our elderly to gain more control over the type of care and services they require and the style of its delivery.  They and their family are able to choose the providers that are best able to service them with a better life within their community and with family.  Recognising that over 75% of current aged care is provided by family (often at home).  On the positive side each individual package for an elderly person opens up more opportunities to be employed in supporting the empowerment of our elderly in shaping their own aged care such that they only pay for the services they actually use.  On the negative side, each aged care service providers presents their offerings in many and varied forms, making it difficult for family members to determine which offering is best for the aged because of their specific wants & needs. 

It is envisaged that if unbiased holistic consultation on aged care services were available at our proposed Manly Community-driven Health Care Facility (McHCF) together with an available Aged Care facility then this capability could readily be extended into our broader community at their homes.   Thereby providing an independent holistic, seamless and unique plan for our community aged care, integrating home aged care with our local affordable aged care facilities.  The “Five Good Friends” program is based upon the finding that aged people are happier and live longer when surrounded by 5 good friends that either stay with them at an aged care facility or are able to readily visit them at their home.  Loneliness and need for intensity care are often the main drivers forcing the move from home care to specialised community aged care.   When and if such a move is required few want to move away from their local community and families.    

Hanging onto the Family Home

Rather than having to force sell the family home to fund Aged Care, several other less dramatic options are available. Here the family home can be used as collateral to fund Aged Care, rather than have it retained as an inheritance for the family.  The cost of Residential Aged Care may be heavily subsidised by government (Refundable Accommodation Payment – RAD), but there remains two major costs:-

  1. Accommodations fees and
  2. Care fees (85% of single pension – $47.86/day, capped at $60,000 over a lifetime).

The RAD is the capital value of the room the resident occupies.  The average RAD outlay today is $350,000 but it can be as high as $1mill., depending upon the Aged Care facility & its living conditions.  The RAD can be payable in full or paid as a daily accommodation payment (DAP).  The DAP is the interest rate set by government (currently 6.22%) against the RAD.  Selling the family home would avoid the DAP 6.22% government interest charge, as the system is designed to reward those who keep the family home.  The DAP operates as an interest only loan arrangement.

The value of the family home is capped at $157,987.20 for the purpose of the means tested care free calculation.  A home can be totally exempt if the spouse is still living there.  The family home is totally exempt from the aged pension eligibility calculation. So retaining it can mean lower aged care fees and a higher pension.   The decision on how to pay the RAD is key to:-

  • Care fees
  • Centrelink or Veterans Affairs entitlements
  • Cash Flow
  • Taxation
  • Asset protection
  • Estate planning

There are typically 5 funding options available for someone wanting to enter a residential aged care facility. 

  1. Selling the family Home

If there is no obvious reason to keep the family home then it can be the most obvious asset to sell to fund a RAD.  The most obvious reason to retain it being that the aged owner is able to and desires to live there or doesn’t want it sold in case they are able to return.  The key issue with selling is that there are likely to be surplus funds available after the RAD has been paid.  Any surplus would most likely need to be invested. 

Also the full value of the home is counted towards the means-tested care fee.  Centrelink deem that excess funds earn 3.25%, despite what a bank’s TDAs (term deposits) rates might be today.   This deemed income is used to calculate pension entitlement and the aged care fee.   Few other options exist, other than:-

  • Gifting the money (limited to $10,000/year or $30,000 over 5 years)
  • Prepaying a funeral or investing $12,250 in a funeral bond
  • Investing in an insurance bond within a family trust
  • Putting money into an annuity (not subjected to deeming) gives back capital/income, like Challenger’s Care Plus annuity product

 

  1. Keeping the House, by selling down other assets

Recognising that staying at home can often be both the preferred and most effective form of aged care, another option towards retaining the house is to sell down other assets.  Take for example a resident with a home worth $800,000 and an asset of a bank TDA also worth $800,000.   Were they to move into a room of an aged care facility with a market value of $600,000 (RAD) was wanted, selling the house would mean that $1 million would need to be invested to total.  No aged pension would be paid and their means-tested care fee would be $82/day for 315 days (until cap is reached).

Keeping the house and using $595,000 of the investment for the RAD, a DAP of $0.85/day would be paid.   They would receive $834 a fortnight in aged pension and incur the means-tested care fee of $39/day for 365 days.   Assuming the house was rented, the pension would remain the same (as rent is exempted) but this would increase the means-tested care fee rate at the rate of $0.50 per dollar in rent (after expenses are deducted).

With this strategy, it is important to reduce the capital gains tax involved to achieve the cheapest tax solution.  

  1. Reverse Mortgaging

Only 3 lenders are known to provide a “reverse mortgage” funds (Bankwest, Heartland Seniors Finance & Macquarie Bank).  CBA & St. George require the borrower to live in the house.  Only La Trobe FAM has an Aged Care Loan product that allows people to use equity (in their home) without repayment until they die or leaves the facility, but only over a limited period.  Such a product provides time for those involved to better think through how best to deal with an ever changing situation. 

Such a loan is available to those over 70yo to draw on the equity in their home specifically to pay the RAD.  No bridges are burnt and no one in the family is taken advantage of.  This keeps the home in the family, allows their parent(s) to still visit their home or renovate it before sale and avoid the fire-sale of a family home, etc. 

The Latrobe FAM loan is 50% of the value of the home (LVR) and a loan rate of 5.99% for the first 5 years, rising to 7.99% in years 6 & 7.  No interest is payable until the LVR reaches 70%  – which would take about 7 odd years at current rates.  The loan is repaid when the borrower leaves the facility (death/return home), whereupon the home is sold or the loan term is reached.   You will never owe more than the house is worth.

  1. Deducting the DAP from the RAD

Aged Care facilities must provide the ability to draw down from any RAD deposit.  If a part RAD is paid then the aged resident must be able to pay the outstanding DAP from the RAD.  Paying as much as possible from the assets outside the home will avoid having to pay the 6.22% interest used to calculate the DAP.  It may be necessary to have the DAP deducted from the RAD to ease cash flow pressure, especially is the RAD is far greater than the assets outside the home. 

If the resident receives an aged pension (in full or part) and uses assets outside the home to pay towards the RAD, this can increase pension entitlement and reduce the means-test on the care fee.  For example, if the market price RAD is $600,000 and you can afford to pay $300,000, this leaves a DAP of $51/day.  So instead of paying this from your cash flow, you can have it deducted from your RAD.   Your DAP will increase as your RAD balance reduces.

  1. Family Paying the RAD   

A resident’s style of living at an Aged Care facility is limited by their ability to pay the RAD.  The family can pay the RAD or increase the contribution to get mum/dad their preferred facility.  A formal loan agreement for the family contribution is best.  Say if one child pays the RAD (differential) to ensure quicker entry before the house is sold, then the parent repays the child once the house is sold, Centrelink/DVA views that money as a gift unless there is a loan agreement in place.  The loan agreement also helps if the RAD is repaid to the estate once the resident dies.

It may be that one child pays the RAD but the will decrees that the estate be divided across several children, then the loan agreement protects the child giving the money to pay the RAD.   Regardless of where the money comes from, when it is paid the RAD becomes the aged care resident’s asset.   

      6. Funding Aged Care

It’s estimated that 80% of people receiving aged care and support in the community receive it from family members and other informal carers (friends, neighbours).  The number of people dying will double in the next 25 years from 150,000 according to ABS.  Family carers could spend towards $9,000 a year in their caring role, some of which can be legitimately reimbursed if the proper arrangements are put in place.

Not-for-profit community groups like Silver Chain in WA provide specialist home-based palliative care.  The service is fully funded with no out-of-pocket expenses for clients, according to Silver Chain Group CEO Christopher McGowan.  This usually involves providing 24 hour care by experienced registered nurses, specialising in Palliative Care.

     7.   Funeral

Funeral arrangements are often left to members of the family to arrange by those who may understand how their deceased relative might have wanted it – cremation, burial or natural woodlands.  In some cases the deceased may have made all their own arrangements in advance of their own funeral, to ensure they get what they wanted and to reduce the stress on family members.  With the exception of the money needed to pay for the deceased’s funeral expenses, all other assets must stay untouched until probate is granted.   The average cost for a funeral in an Australian city is around $6,000.  The final costs depend upon funeral director’s fees and personal choices around caskets, church services, flowers, music, newspaper ads, etc.  Cremation is cheaper than burial.  And it costs more to be buried above ground (in a crypt) than below ground.   It is worth checking how long an interment rights last before the cemetery reuses the burial site and/or the removes the burial stone, etc.   Woodland burial are becoming popular either in a cemetery ground or through some private arrangement.

There are typically three options for pre-planning a funeral, which are exempted assets according to Centrelink & Dept of Veteran Affairs (DOVA):-

  1. Funeral bonds – are managed investments that can earn interest and most are capital guaranteed. An initial investment is followed by regular contributions or some lump sum up to the amount wanted 
  2. Funeral plans – means obtaining agreed prices for all the components (casket, burial fees, flowers, etc.) from a funeral company as a fixed cost in advance of the funeral
  3. Funeral Insurance – like any insurance, this is where you pay regular monthly/fortnighly premiums for a fixed amount of cover

       8.  Will

It is always best when a deceased person has left a will.  Roles relating to Power of Attorneys conclude on the passing and the assets of the deceased becomes passed into the hands of whoever has been appointed as Administrator or Executor of the will.  These are usually an independent or trusted person such as an accountant or solicitor.  “The executors may have to pay fees to obtain a grant of probate and other estate liabilities and costs accumulate until all estate assets are accessible.   The Executor(s) must then be reimbursed for payments of those costs out of the estate, before any distribution can be made to any beneficiaries.”  These cost can run into thousands of dollars, often causing the distribution process to be delayed for 3- 5 months.  Someone (for example one or more of the deceased children) should be appointed to ensure the will of the deceased is followed by the Executor and carried out in the terms of their loved one’s will.  This process can sometimes cause friction between family members who feel excluded.   Because of these stresses, some members of a family may wish to be excluded from this process because of potential costs and all the stress involved.

The executor usually follows these 3 steps:-

  • Places a notice in the local paper or Supreme Court of the application to have the will validated
  • Seeks anyone or organisation(s) believing they have entitlement to the deceased assets and advises them to come forward to identify their legitimacy.
  • Application is then made to the Supreme Court for grant of Probate where upon the assets of the deceased are vested in the name of the Executor. Supreme cost vary from state to state and are based usually upon the size of the estate (like $1,000+ for a $1mill estate?)

      9.  Probate  

Once the Supreme Court grants probate to a nominated and authenticated solicitor, the objective shifts to ensuring all valid claims on the deceased’s estate are paid and the remaining assets distributed in accordance with the will of the deceased person.    

 

Contact Name: Darryl Dobe
Contact Email Address:
Start Date: 20-Jun-2017
End Date: 21-Dec-2018
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  1. Darryl Dobe   

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