Protecting family assets in the move to aged care
A move into aged care raises many complex issues that can be confronting and difficult to navigate.
Both emotional and financial challenges can be faced, not only for those entering care, but also for their immediate and extended families. When the decision is made that one member of a couple is going to enter an aged care facility, it is important to review estate planning and home ownership arrangements to ensure there are no inheritance problems that could negatively impact their aged care fees and Centrelink entitlements.
This example highlights the importance of reviewing estate planning arrangements
James and Anna jointly own their family home valued at $1m. The decision is taken that James will enter an Aged Care facility due to deteriorating health.
While Anna remains in the family home, the value of the property is not taken into consideration when calculating James’ aged care fees or Centrelink entitlements. However, in the event Anna passes away, there are significant implications for James’ aged care fees and Centrelink entitlements.
Specifically, the value of their home will be assessable when calculating James’ aged care fees (capped at approx. $157,000) and its full value ($1m) will become assessable if the home is sold. This could result in a significant increase in James’ aged care fees and a material reduction in his Age Pension entitlements.
Considering an alternative strategy
By reviewing the couple’s estate planning and home ownership arrangements upon James entering care, we can limit the implications on James’ aged care fees and Centrelink entitlements in the event Anna passes away.
| If ownership of their home is changed from ‘joint tenants’ to ‘tenants in common’ where they each own 50% of their home ($500,000 each) and Anna’s Will is updated to reflect a beneficiary of her estate besides James (e.g. their children), this ensures James does not inherit Anna’s portion of the home ($500,000). This can in turn limit the impact on James’ aged care fees and Centrelink entitlements if the home is subsequently sold down the track. |
This strategy can also potentially be applied to other jointly owned assets such as a bank accounts and direct shares.
There are wide-ranging implications to be considered in these circumstances and many personal scenarios are different. This is an area where sound advice based on facts, experience and knowledge is highly valuable.
General advice disclaimer: This article has been prepared by FMD Financial and is intended to be a general overview of the subject matter. The information in this article is not intended to be comprehensive and should not be relied upon as such. In preparing this article we have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained on this article to particular circumstances. FMD Financial, its officers and employees will not be liable for any loss or damage sustained by any person acting in reliance on the information contained on this article. FMD Group Pty Ltd ABN 99 103 115 591 trading as FMD Financial is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977. The FMD advisers are Authorised Representatives of FMD Advisory Services Pty Ltd AFSL 232977. Rev Invest Pty Ltd is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977.