Does Nan sell the house?


Yes this is the question we all face when Nan has reached the age & she admits that an aged care facility is really where she needs to be. 

If Nan is assessed by ACAT as ‘low care’ or high care with extra services’ then an accommodation bond will need to be paid.

Recall that the accommodation bond depends on the facility & is charged if Nan has assets over 41,500 currently. It can be a large say 350K on average but we recently attended a talk by the Minister who mentioned a bond of 2.1m.

If Nan moves to a hostel or nursing home the decision to sell or keep Nan’s home can affect how much age pension Nan receive as well as the daily care fees Nan will pay. Overall this impacts Nan’s total net income.

How can the bond be funded when it is sizable say 400k on average & Nan doesn’t have the funds.

Recall that a facility doesn’t have to take Nan as any agreement is mutual. You may find a facility to place Nan is not easy to find.

 Also recall that the house counts as an asset under aged care assessment  and hence the accommodation bond [or charge if high care]. [We will assume that Pop has passed on.]

 

1.       If Nan sells her home, the money Nan receives will be assessed depending on how it is used.

If Nan sells the house & has money left over after the accommodation bond is paid  then as Nan like most is on some part pension then her pension may be affected as she may be earning more than in the past.

If Nan as usually the case places the surplus funds  into cash at the bank then these will have deemed rates of return.  Nan’s pension income reduces if she earns more than 152p.f. or she has assets over 332K as a non home owner. This adds up if as on average Nan ticks on for 5 years.

 

How does Nan pay the accommodation bond?

The accommodation bond can be paid as: a lump sum or periodic payments1 or a combination of the two.

A facility can deduct a retention amount on a monthly basis of up to a maximum of $3,876 p.a. for up to five years (depending upon the amount of the bond shown in the following table). The retention amount does not alter during the five-year period.

Bond amount
Maximum annual retention amount
Less than $20,040
$2,004 per annum
Between $38,760 and $20,040
The maximum is calculated by multiplying the bond by 10 per cent
$38,760 or above
$3,876 per annum

The Remaining bond must be refunded within 14 days if a resident passes away or leaves the accommodation.

If transferred to another care facility, the bond may be transferred and the resident should not have to pay an additional bond in a low care facility (such as a hostel) or an accommodation charge for a high care facility (such as a nursing home).

 ¹ If the periodic payment method is chosen, a facility can charge a maximum interest rate of 7.24 per cent effective from 1 January 2013 to 19 March 2013. The interest rate is fixed upon the date of entry into the aged care facility.

2.       In many cases the family or Nan want to keep the house & pass it onto the family. They forget that in many cases the family have their own home & mortgage & that selling the house after Nan passes on is what will happen.  As often said ‘where there is a will there is a relative’& any lump sum is appreciated for the mortgage or the school fees or hot air ballooning.

 If Nan keeps the house then Nan must meet 2 of these 3 parameters.

·         Not pay the bond in full & Nan must pay interest on the outstanding amount by periodic payments

·         Pay an accommodation charge which is if Nan is in High care.

·         Rent out the former home.

This option has Centrelink exemptions such as rent & asset test but will be assessable by ATO.

Lets also not forget that house maintenance is 1%to 2% of house value p.a. & net income returns are often bettered elsewhere.

For Nan & the family this is an emotional time & we must not forget that Nan is the client. Hence what is best for her must be the overriding consideration.

As we explained an accommodation bond  to Les, a not so retiring retired accountant he immediately concluded  so the bond doesn’t count as an asset’. [For Centrelink purposes.]

Exactly Les.

This is one reason why a resident paid $2.1m for a bond last year.

 It is a reason why the government is bringing in rule changes from July 2014 under the banner

Living Longer. Living Better. It includes limiting the size of bonds & as often the case what is good for them is not good for you.

 As can be seen Nan has both Centrelink & aged care assessments & they are very different. We haven’t brought in the daily charges  & other charges that are charged daily as that is for next time.

It is only government with brigades of employees who could make this decision for Nan to sell so complicated. You can read all @ Department of health & Aging.

 

John McAuliffe

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