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Aged Care

Restructuring assets to reduce fees

Sally's story

Background

Sally is widowed, 80 years of age, and has early stage dementia. She moved from her family home in June 2014 to   Aged Care accommodation.

Sally’s children, Doug and Nancy, handled all the arrangements for her move to the accommodation facility. They acknowledged later that, at the time, they did not fully understand Sally’s options in relation to payment of the accommodation bond and the ongoing fees. They found the whole issue very confusing and ultimately made rushed and ill informed decisions without considering the relevant facts and issues. They did not consult a financial adviser.

Sally had owned the family home and was relatively well off financially, having investment assets of $1.2 million. Her investments included Cash, Term Deposits and Australian Equities (direct shares). Sally did not receive the Age Pension as her financial assets were in excess of the asset test limit.

An Accommodation Bond of $400,000 was paid to the accommodation facility. Doug and Nancy did not disclose details of Sally’s assets and income to Centrelink, and as a result, Sally was charged the Income Tested Fee at the maximum rate.

Shortly after moving into the facility, Sally’s house was sold for $450,000.

Results

In June 2016, Doug decided that he should talk to a financial adviser about the ongoing fees that Sally was paying. Doug came to see us and we reviewed Sally’s financial circumstances. It was apparent that she was paying fees that were in excess of what she should pay, for someone in her financial situation.

We analysed Sally’s financial situation, having regard to the fees she was paying and the correct level of fees.

We recommended to Doug that he advise Centrelink of Sally’s financial situation, which would trigger a recalculation of her fees.

The following table shows the analysis:

 

Fees Sally was paying

(per annum)

   Fees Sally should have    been paying (per  annum)

Difference (per annum)

Basic Daily Care Fee

$17,611

$17,611

Nil

Income Tested Fee

$27,974

$5,907

$22,067

Total fees paid

$45,585

$23,518

$22,067

 

We advised Doug that it was possible to reduce Sally’s fees even further by restructuring her investment portfolio. We recommended that Sally invest some of her capital in an Annuity (income investment), that had a similar rate of return to the term deposits that Sally was invested in. After the restructure, the Income Tested Fee was eliminated from the Hostel fees, resulting in a further saving of over $5,900 per annum.

We explained to Doug that it may be possible to claim a refund of some of the excess fees that Sally had paid since moving into the Aged Care facility. Doug was very happy for us to prepare the paperwork and lodge it with Centrelink.

As a result of seeking our advice, Sally was able to reduce her accommodation fees by nearly $28,000 per annum, and was able to apply for a refund of excess fees that she had paid.

 

* Names have been changed to protect client privacy.

What do you do next:

If you need help with your Aged Care needs, or that of your love one, contact one of our Accredited Aged Care Specialist today on 03 8394 0300 or email us at mfmadvice@hillross.com.au to received specialised advice.

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