Helping your clients with an aged care plan
With more than one million retirees already accessing aged care services in Australia, professional advisers can no longer afford to ignore the issues around aged care advice.
Planning ahead can help to demystify aged care and reduce stress levels. But helping clients to plan ahead is not so much about how to structure assets to minimise the fees but more about creating awareness.
With awareness and pre-planning, clients can maintain control and choice, have access to the financial resources to pay for care and minimise the stress on families. Advice professionals need to be ready to assist these clients with the challenges ahead.
Challenge one: Encourage clients to plan ahead
Too often clients are reluctant to think about a potential move into care. This means clients and families fail to plan and ignore the warning signs until a crisis emerges. At this point, the time available to evaluate options is limited and decisions could be rushed. Families may start to argue and conflicts arise.
Proactively raise issues and create awareness with your older clients, as well as with younger clients who have elderly parents.
Some ideas to get you started include:
• Draw family trees at fact find or review meetings to identify family responsibilities and who may need to be involved in decisions.
• Encourage clients to hold and facilitate family meetings to discuss preferences and expectations.
• Run client seminars to generate awareness on aged care planning.
• Include aged care articles in newsletters and marketing materials.
Challenge two: Understanding the fee structure
Clients and families are often surprised by the level and range of fees. Helping them to understand the fees may help them to focus on the important task of how to fund the fees rather than just look for the cheapest option.
Build a picture so clients can understand the logic behind the fees:
• Paying for accommodation – we all need to either find a lump sum of money to buy a home or generate income to rent a home. Residential care is firstly accommodation that needs to be ‘purchased’ (refundable accommodation deposit) or ‘rented’ (daily accommodation payment).
• Paying for basic living expenses – food, electricity, cleaning and laundry services and nursing assistance is subsidised by the government. Residents are asked to contribute to the cost through a basic daily care fee plus a means-tested fee for those who have a higher capacity to pay.
• Luxuries and lifestyle – additional items can be purchased on a user pays basis or in bundled packages as additional service fees.
Challenge three: structuring finances
Accommodation costs are set by market forces with prices published on the My Aged Care website. But if assets and income can be reduced to low enough levels (to become a low-means client) before the move, the government may subsidise accommodation and regulate how much the client’s contribution is.
In this way the accommodation cost may be cheaper, but is not always better. Choice and control could be lost. The client may be faced with accepting a place in whichever service has a low-means place available and it could even be a shared room.
A home owner will generally not qualify as low-means unless their spouse (or other protected person) will continue to live in that home.
If clients wish to aim for entry under the low-means rules, there are not many pre-planning strategies to reduce assets. One option could be to enter into a granny flat arrangement to transfer ownership of the home to a child in exchange for a life interest to live in the home.
If this transaction occurs within five years before a move into residential care, it could be captured under gifting and deprivation rules (depending on circumstances). Instead of being a solution, it could create more problems. Other legal issues also need to be considered.
Challenge four: Set up powers of attorney
Dementia is a leading factor behind the need for care services. So when the time comes, it is likely that the client will need to delegate financial decisions to someone else. This is easier if an enduring power of attorney (and guardianship) is in place.
If the person has already lost legal capacity, it is too late to set up the powers and a trip to the Guardianship Tribunal will be needed.
• On average, one new case of dementia occurs in Australia every six minutes
• 30 per cent of people over the age of 85 have dementia
• More than 50 per cent of people in subsidised aged care facilities have dementia
Being business ready
The size of this population segment and the increasing complexity in aged care legislation provides opportunities for advisers to generate business through an enhanced advice offering to existing clients and as a means to attract new ones.
Advisers need to consider their business model, upskill their knowledge and personal skills and broaden their referral network. It is important to also have a clearly defined service proposition and price structure to ensure the value added offers value to clients.
Natasha Panagis, technical manager, Aged Care Steps