In providing Aged Care advice the most common question I get is around whether the family home should be sold, in fact its often an assertion clients want to understand, something they were told at a barbeque, that its’ always the best option for funding Aged Care.
This is no surprise when the Family Home is likely the biggest asset for most older households, with 82% of 70-79yos owning one in 2021, and the person put in charge is having to find a way to fund the RAD.
The value of the family home has some of the most complexity, and is often the least straightforward decisions when it comes to the financial assessment for Aged Care costs, as well as Aged Pension income. In this blog, we'll explore how the family home is calculated in the means test and Centrelink and the concept of a protected person, to help you make better decisions with your parents care needs.
Centrelink’s Role
Firstly it is important to understand Centrelink’s role in this process. As with the Aged Pension Centrelink are the gateway for means testing and communication of the appropriate fees to the Aged Care Facility.
Their means testing both impacts the Means Tested Care Fee, but also whether a person is Considered Low Means, and therefor how their Accommodation Costs (RAD/RAC) are calculated.
Considering the Aged Pension is also key when looking at the best option for funding aged care, as the wrong decision can substantially alter the amounts received.
Centrelink has different rules for the Family home in calculating the Aged Pension, which need to be considered in conjunction with the rules around the family home.
Two Year Exemption: For two years after the homeowner has left the property, and moved into Care Centrelink do not include the Family Home in the assessment.
Rent is included: Any rental income is included in the Aged Pension Income Test, which can impact a persons Centrelink benefits.
How the Family Home is assessed for Aged Care
To know how a family home will be assessed, we need to know the living situation before our family member moved into Care.
Exemption for Protected Persons
If a protected person resides in the family home, the value of the home may be exempt from the assets test. A protected person can be:
Spouse or Partner
Dependent Child
Carer: A carer who has been living in the home for at least two years and is eligible for an Australian Government income support payment.
Close Relative: A close relative who has been living in the home for at least five years and is eligible for an Australian Government income support payment
Where there is no Protected Person
Where there is no Protected Person, the property is not assessed at is Market value, but at a figure known as the Capped Value.
The Capped value is set by the Government, is linked to the Daily Care Fee (and therefor Single Aged Pension). As at the 20 March 2024 the capped value is $201,231.20. In most cases your parents property will be worth more than this so the property is assessed at that number. Where it is below, the lower value will apply.
Importantly, this capped value is used even when the property is occupied by a non-Protected Person, rented out or left empty.
Where there is a Protected Person and the assessable assets are under this Capped Value, the entrant could be considered Low Means changing how their Aged Care fees are calculated. This can add more complexity where both members of a couple want to move into care together, and timing is important. These are both topics I will cover in another blog.
Important questions to answer when thinking of selling family home when moving into care
If you haven’t already gathered, a property being retained is can look much more favourable for Centrelink and Means Tested Fee calculations than just selling it; however this decision does not exist in a vacuum, and needs to be considered alongside their broader situation including cash flow, assets, their will and family dynamics.
Here are 7 considerations for when making this decision
If there is a Protected Person: How this impacts the overall costs, as well as their needs
What does your parents will say, and what were their wishes for this property and all other assets? Is there a conflict using one asset to fund care, over another.
If there is a familial or emotional connection to the property, contrasted to the cost of retaining it? Is maintaining this connection viable or even possible?
How much work needs to be done to clean, tidy and declutter the property, and who is able to do so (or do we need to bring in professional decluttering cleaners)?
If we rent it out, who can manage it? Do they want to?
If it is left unoccupied how do we mitigate risks of maintenance, vandalism and accidental damage.
What are the 1 year, 2 year and 5 year outlooks for retaining, renting or selling the property and the broader impacts. Is there an obvious option, or do we need to broaden our considerations? If we sell, what do we do with the proceeds?
In closing
I tried to keep this blog as succinct as I could, but you can see that there are considerable complexities when it comes to making Aged Care decisions around the family home, due to the flow on effects and multiple rules sets playing out at once. The assertion to just ‘sell and pay the RAD’ is fraught with things that could go wrong.
I am biased in saying you should get advice from an Accredited Aged Care Financial Adviser, but if you choose not to I hope this blog is helpful in avoiding mistakes and pitfalls.
Resources
For more information or to book an assessment visit MyAgedCare: https://www.myagedcare.gov.au/
If you suspect a loved one may be experiencing elder abuse contact the Eldar Abuse Phone Line on 1800 353 374.
If you think they are in immediate Danger Ring 000 or make a non urgent report to Crime Stoppers in your state.
