Alex*has just told us that he has been very busy
cleaning out his father’s house which they have just sold. It was sold because
his Dad who lives alone can’t look after himself & his two sons can’t look
after him either.
How common is that?
Hence father has found a placed in some aged care
facility.
We don’t know the details but our initial casual
discussion was that the father had nothing & hence he would not see us
because he had nothing.
Apart from his house.
Now he doesn’t have that but he now has the money in
the bank.
And that is the problem because Centrelink need to
know quarterly or when circumstances change father’s assets & income.
[A resident should contact
Centrelink/DVA within 14 days (or preferably immediately) in the event that
there are any changes to their assets/income as the client’s MTF is
recalculated.]
Why so?
So Centrelink can adjust which they pay father.
It won’t be more.
To complicate the problem even more is that Centrelink
& aged care operate under different rules.
Does that surprise you?
For Centrelink that is fairly simple to define as
there are asset & income calculators
on Centrelink websites to tell Alex how much his father’s income drops by.
Father becomes a
non homeowner for Centrelink purposes.
However aged care is a minefield & some advice is
cheaper than the consequences of no advice.
As the house has been sold & the cash is in the
bank then it all counts.
If the home is sold, the proceeds may
be used to pay a lump sum accommodation payment, either a Refundable
Accommodation Deposit (RAD) or a Refundable Accommodation Contribution (RAC).
The RAD/RAC is included as an asset for the purpose of calculating the MTF.
I.e. the Means tested fee MTF goes up as the name
suggests.
If Alex & his brother had not sold the house then the capped asset value
of the house is currently155,823.20. There
is now more than that in the bank & now all is assessed. I.e. no capped
amount.
Two options
that Alex & his brother should have considered are
1.
Rent out the house as
The
rental income received is exempt for both aged care and social security
purposes if:
- · the former home is retained and rented, and
- · a person is paying part or all of their accommodation payments via a Daily Accommodation Payment (DAP) or Daily Accommodation Contribution (DAC).
However,
the capped asset value of the home ($155,823.20 indexed)is used to calculate
the MTF/MTA. If retained and rented, this strategy:
- · may enable the home to be retained long term for personal or estate planning purposes
- · assist with increasing cash flow, which may help to meet the ongoing costs of care, and
- · provides ongoing concessional treatment of the former home, by placing a capped asset value on it for fee assessment for aged care purposes. If financially viable, this may provide a compelling reason to retain the home and reduce the MTF.
2. The other option could be
When a person vacates their home to
move into residential care, and the home is not occupied by a spouse, the
former home continues to be an exempt asset for social security purposes for a
period of two years. This commences at the time the home is vacated. The income
support recipient’s homeowner status is maintained
i.e. not even rented but of course property has
costs.
Always it is an individual problem & like all problems
there might be a better solution & that is maybe the unemotional
calculation & options explored.
We do
present to you a table of options for
you & the cost of advice as always is less that the consequences of DIY
Destroy it Yourself.
If we were to sit down in three years time & looked back what do we need to do today so that you are financially & personally better off & happier.
As others do call us on 07 3848 1088 or email us or visit our websites.
John McAuliffe
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