Net assets for aged care entry
The amount that a new entrant to Commonwealth regulated residential aged care could be asked to pay for aged care Accommodation is based on the ‘net assets’ of the new resident. So how is the amount of net assets for aged care entry calculated for permanent entry to residential aged care?
Assessment of net assets for aged care entry
The asset assessment form requires a listing of all of the assets and all of the debts of the residential aged care entrant.
The assets include the obvious items such as bank accounts, investments, motor vehicles and holiday houses. The former home of the aged care entrant is usually counted as an asset if no close family member lives there.
Some less obvious assets also need to be included in the asset assessment.
Remember that money ‘loaned’ to daughter Sue to help with the deposit on her home.
Maybe you advised Centrelink at the time that you had made the payment as a ‘gift’ to Sue. If the gift payment was more than five years ago then the excess part would have expired by now.
But if the gift payment were more recent then Centrelink could have an ‘excess gift’ recorded on the Age Pensioner’s record. Excess gifts count as part of net assets for aged care entry.
Self funded retirees need to report any major gifts over the preceding five years as part of their assets on entry to residential aged care.
Read about Gifting and excess gifts at Centrelink Gifting
Perhaps you advised Centrelink that you had made and interest free loan to Sue. The amount of the loan plus any accumulated interest would count as part of net assets for aged care entry.
Some seniors actually become joint owners of the property that they helped a family member buy.
For example, Joan contributed $40,000 towards the purchase of Sue’s home and both Sue and Joan are shown as joint owners on the Title for Sue’s home. Joan’s share of the value of Sue’s (and Joan’s) house would count as part of Joan’s net assets for aged care entry.
If Joan were a self-funded retiree she might have forgotten about her contribution to buying a home for Sue. Be aware that Centrelink might check the Titles register for additional property owned by a self funded retiree entering aged care.
Debts to be offset for calculating net assets for aged care entry
Net assets for aged care entry means the value of your assets after deducting the value of your liabilities. Your liabilities include your debts and any other amounts that you owe.
There are the obvious bills waiting to be paid for household utilities, insurance and Municipal Rates. These bills could be paid from the bank account before the bank balance is entered as an ‘asset’ on the asset assessment form.
Then there are the other liabilities that the aged care entrant was not intending to clear this month. The total of these debts might exceed $10,000 so they are not ‘trivial’ to Centrelink. Centrelink would need to see your records for each big ‘debt’.
Debts to non-family offset from net assets for aged care entry
Seniors are unlikely to have neat records of their gambling debts and the lawn mowing guy. But usually records exist somewhere for most other significant debts to non-family members. The entity owed the money could be willing to provide a statement of the amount outstanding particularly if you were intending to pay the debt in full after selling the home.
Examples of debts that aged care entrants could offset include credit cards, reverse mortgages against the home, bills for essential maintenance or modifications to the home in the hope that the senior could stay home rather than go into care, caravan loans, ‘pay day loans’ and other short term unsecured borrowings.
Also, a senior could be paying some large debts by instalments such as outstanding Court fines, Centrelink overpayments and additional expenses for winter heating spread over several spring/summer utility bills.
Offsetting debts to family members on aged care entry
Documented loans to family members could be subtracted when calculating the value of net assets on aged care entry. Alas, many families do not record the detail of ‘loans’ within the family. The challenge could be to determine the current value of a substantial debt to a family member.
For example, Kim lent Mary $30,000 ten years ago so that Mary could buy a small home unit when she retired from work. Now that Mary is going into residential aged care Kim expects to be repaid the loan with interest.
If Kim and Mary had a written loan agreement showing the interest rate to be charged and that the capital and interest were to be repaid from the sale proceeds of the home unit then Centrelink could accept that the loan was a debt. In this case the amount of the loan including accumulated interest, could be subtracted from the value of Mary’s home for calculating her net assets for aged care entry.
But if Kim and Mary had not bothered to write themselves a note about the loan then Centrelink might not allow the accrued loan to be treated as a ‘debt’ for the purposes of calculating Mary’s net assets for aged care entry. Later when Kim was repaid from the proceeds of sale of Mary’s home unit, Centrelink might treat the repayment as a ‘gift’ unless Kim could show good evidence that it was a true loan.
Hint: If you are lending money or helping a family member to buy a home, then write out a ‘loan agreement’ for both parties to sign and keep a copy. Seek professional advice if you need help to write the loan agreement.
Help is available. Christine at Financial Care Services is experienced with Centrelink Age Care Entry Asset Assessment Applications and the various Centrelink means tests.
If you need help with an Age Care Entry Asset Assessment Application you can call Christine on 03 9808 0338 to arrange a Consultation to discuss your position.
Christine could assist you with collating your personal data, and completing the Centrelink Aged Care Entry Asset Assessment Application form for you to sign.
Normal hourly rate consultation fees apply for assistance with personal data collation, completing Centrelink forms and attendance at a Centrelink office with you.
If you would like further confidential, independent and professional advice about Centrelink, lifestyle aged care or financial issues please contact Christine Hopper
03 9808 0338.
Disclaimer: The information contained in this website is of a general nature only and does not constitute “financial advice”. You should obtain your own personal financial advice before investing any money or moving in to any retirement village, lifestyle community or aged care facility.
Financial Care Services is licensed to provide financial advice to individual clients based on their personal situations.
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To make an appointment for professional advice, call Financial Care Services 03 9808 0338