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
