Moving into aged care can be both an emotional and costly experience. When a couple requires care at the same time, many prefer to move in together on the same day to avoid separation and to support each other. While this makes emotional sense, the financial implications of moving into permanent residential care on separate days can be significant. A staggered entry approach—where a couple enters aged care on different days—can help manage costs and optimise financial outcomes.
When a couple enters permanent care on the same day, their assets and income are generally assessed as a 50/50 split, regardless of whose name the assets or income are in. Additionally, their family home is assessed at a capped value ($206,663) each for the aged care means assessment. Regardless of other assets, both individuals will then be required to pay the Refundable Accommodation Deposit (RAD) or the Daily Accommodation Payment (DAP) or a combination of the two.
An alternative approach is a staggered entry into care, so they enter permanent care on different days. This results in the property being exempt for the first person to enter care. Depending on the value of their other assets, this could lead to the first person being assessed as a low-means resident, significantly reducing their aged care costs. As a low-means resident, their accommodation costs would be subsidised, and they would pay a Daily Accommodation Contribution (DAC) instead of a DAP. They would also have the option to pay a Refundable Accommodation Contribution (RAC). When the second member of the couple enters care, the family home is then assessed at the capped value, and they would be required to pay a DAP or RAD.
Scenario
To illustrate the financial implications, let’s examine a case study involving a couple who recently entered care.
Dan and Joan both required residential aged care. They owned a home together valued at $950,000, had $195,000 in cash assets, $5,000 in lifestyle assets, and received the full couples’ Age Pension. They were quoted a RAD of $750,000 each for two single rooms.
If Dan and Joan entered care simultaneously, their assets would be assessed at $306,663 each (capped value of the family home plus 50% of their combined other assets). They would each pay a DAP of $167.88 per day (assumes MPIR 8.17%).
However, if Dan moved into care first, he would be assessed as a low-means resident, with his assessable assets totalling $100,000 (the family home would temporarily be exempt as Joan is a protected person). Dan would initially pay a DAC of $18.51 per day. When Joan enters permanent care, the family home would no longer be exempt, and its capped value would be included in the asset assessment. Consequently, Dan’s DAC will increase to the maximum of up to $69.79 (indexed) per day. This is considerably lower than the DAP of $167.88 a day.
This example highlights how staggered entry can reduce initial accommodation costs and provide greater financial flexibility.
Important considerations for low-means residents
Low-means residents will have their assessed DAC vary as their circumstances change, including:
- Protected person status being lost
- Changes to the resident’s assessable assets including the sale of the former home
- Death of a spouse
Changes to the facility’s circumstances can also affect DAC, such as:
- A change in the ratio of low-means residents
- The facility being classified as significantly refurbished
Once assessed as low-means, a resident will always remain a low-means resident regardless of future financial changes, unless:
- They move facilities and are reassessed (after 120 days from the initial assessment)
- They leave the aged care system for 28 days or more
It is important to know some aged care providers may not accept low-means residents or may offer them limited accommodation options, such as sharing a room or a bathroom. Other providers, however, may offer the same standard of accommodation for both low-means and full RAD-paying residents.
We are here to help, every step of the way
Moving into aged can be complex and it is important that residents and their families understand the implications of being assessed as a low means resident. Getting the right advice before entering aged care will ensure residents and families make the right decisions and understand their implications, reach out to Alteris’ Lifestyle and Care team today.
Alteris’ specialist division of financial advisers are accredited in aged care advice and can talk you through all available options and explain the various financial considerations. Their team can also provide full support with ensuring the fees and pension are correct by working directly with your accommodation provider, Services Australia and the relevant government departments. Learn more about Alteris’ accredited aged care financial advisers.