Now that my loved ones are growing older, what do I need to know about aged care? Although the future of an individual is uncertain, some careful planning for the possibility of requiring aged care accommodation can be provide some reassurance about what lays ahead. The virtue of aged care is that the sooner you start organising it, the smoother the transition will be.
In 2010, 400,000 Australians were over the age of 85. By 2050, that number is anticipated to escalate to 1.8 million (of an estimated 36 million).
In response to our aging population, the Government has introduced reform known as the Living Longer Living Better (LLLB).
What is the LLLB?
The LLLB reforms improve the Commonwealth funding and regulation of aged care (which are almost exclusively Commonwealth responsibility). The reform includes a $3.7 billion package to:
- help people stay at home;
- help carers access respite and other support;
- deliver better residential aged care;
- strengthen the aged care workforce;
- tackle the nation’s dementia epidemic;
- support older Australians from diverse backgrounds;
- ensure better health connections;
- build a better health care system for the future.
Does the LLLB reforms apply to all aged care residential facilities?
The LLLB reforms only apply to aged care residential facilities that have been ‘approved’ under s 6.1 of the Aged Care Act 1997. An excellent resource to determine if a service or facility falls within the LLLB is the My Aged Care Service Finder.
Who do the LLLB reforms apply to?
Under the LLLB reform, residents are placed into 3 groups and to determine how the reform will apply to this resident.
“New Resident” – All reforms will apply if this resident enters a residential care service on or after 1 July 2014
“Transitioning Resident” – Will apply to residents who first entered residential care before 1 July 2014 and either:
have not been provided with residential care for a continuous period of more than 28 days (other than if on leave); or
before moving to another service made a written choice to be covered by the new system for fees and payments
“Continuing Care Recipients” – He or she was in residential care service before 1 July 2014 for such time as the resident continues in the same service. The major reforms of resident fees and accommodation payments discussed below will not apply to them.
Resident Fees for Care and Services:
The basic daily fee:
In residential care, all residents pay a ‘basic daily fee’ (85% of single pension = $47.86)
The calculation of these fees for care include a means tested assessment which considers a resident’s income and assets.
There is an annual ($25,731.05) and lifetime ($61,734.55) cap on the means tested component of the care fees.
Within this means tested assessment, the value of the principal home is capped at $157,987.
Accommodation bonds and charges no longer apply for post 1 July 2014 entries into residential care
Payments for Accommodation:
Required payments for low means residents (based on the above means tested assessment) are:
- Refundable Accommodation Contributions (RACs) – which is a lump sum amount with government assistance; and
- Daily Accommodation Contributions (DACs) – which are rental-style payments with government assistance.
Required payments for non-low means residents are:
- Refundable Accommodation Deposits (RADs) – which work like an interest-free loan to an aged care home;and
- Daily Accommodation Payments (DAPs) – which is the full cost of the accommodation made in rental-style payments.
The following stages must be completed before entry into residential care:
- Prospective resident and/or representative to be provided with an ‘Accommodation Agreement’ and given other specific information.
- The intending resident and the provider agree in writing about the maximum payable price (‘Price Agreement’).
- The Accommodation Agreement to be signed before entry or within 28 days of entry.
Implications for Asset Structuring and Estate Planning:
By contacting our office, we can provide guidance on:
- whether to hold or divest home property
- the tax implications of entering aged care
- the impact aged care has on a joint tenancy
- any changes required to the resident’s Will or any other documents
- the Accommodation Agreement being considered
- probate and refund of accommodation costs
- third party payment of the accommodation payments.
Advance Care Directive and Power of Attorney:
In conjunction with organising your aged care future, consideration should be given to having an Advance Care Directive and a Power of Attorney prepared if you don’t have them already. Both documents are generally required prior to entering an aged care accommodation facility as the facility needs to know who has the authority to make decisions on behalf of the resident if the resident becomes unable to do so themselves.