Residential aged care for seniors in new relationships

The complexities of aged care accommodation costs for Couples at Centrelink who met later in life

By Christine Hopper

James and Jenny exchanged the family home for a modest new townhouse near their adult children.  James had only recently retired and when Jenny died suddenly.

After a few years of living alone, James embarked on a new relationship with Judy.  Judy had downsized from the family home where she had brought up her children, into a villa unit in a suburban retirement living community.  James leased out his townhouse and moved into the villa with Judy.

Although they were not married, James and Judy accepted that they were a ‘couple at Centrelink’; they each received only small part Age Pensions as their combined financial assets and James’ townhouse were counted against the Asset Test for a ‘home owner couple’.  They had sufficient income for their needs coming from the part Age Pensions, the rent from James’ townhouse and their financial investments.

Residential aged care for seniors in new relationships

For a few years all was well as James and Judy aged gracefully.  Then Judy had a severe stroke leaving her unable to move around independently. Judy required residential care after several months of hospital then rehabilitation treatment.

Judy had earlier appointed her son, Joshua, as her Attorney in case she ever lost her capacity to act for herself.  So Joshua finds an appropriate aged care facility for his mother and takes on her financial affairs.

Joshua discovers that Judy had signed the contract for retirement living villa when she was single so James cannot stay on there without entering a new contract in his name.  While Judy is still in hospital, James decides to move back into his townhouse and advise Centrelink that the townhouse is his principal residence.

Joshua expects that Judy’s Age Pension and ongoing investment income would cover her daily fees to the aged care facility so he is confident that he could manage her affairs without drama.

Determining in the Maximum Accommodation Bond Amount for residential aged care for seniors in new relationships

The Accommodation Bond required for Judy’s preferred aged care facility is $250,000.  Joshua expects that about $200,000 would be returned from selling her retirement living villa after allowing for all the deferred and exit fees.  Judy’s investments are valued at about $200,000 so she appears to have adequate assets for her Accommodation Bond.

But then Joshua is confronted with the Centrelink forms for residential aged care.  He quickly realizes that Centrelink treat Judy as a member of a couple not as a Single person.  James is willing to attend Centrelink with Joshua to have the combined records of James and Judy updated.

The result is that James and Judy have about $350,000 of financial assets plus the value of their homes.  Joshua is able to demonstrate that the value of Judy’s villa and the combined value of all of James’ and Judy’s personal effects, household contents, motor vehicle and financial assets is just over $585,000.  This asset level is sufficient for Judy to be asked for an Accommodation Bond of $250,000.

Pay the Accommodation Bond upfront for residential aged care for seniors in new relationships?

Joshua realizes that the interest rate charged on the unpaid portion of an Accommodation Bond is much higher than the interest Judy’s money is earning at the bank.  So Joshua uses $180,000 of Judy’s money to part pay her Accommodation Bond.

Joshua and James consider using James’ money to pay the final $70,000 of the Accommodation Bond.  But if James paid  that $70,000 of Judy’s Accommodation Bond and Judy died at the aged care facility then the whole Accommodation Bond would be refunded to Judy’s estate. The $70,000 that James contributed to Judy’s Accommodation Bond would be bequeathed to her children.

Income Tested Fees for Residential Aged Care for seniors in new relationships

Once James is settled back into his townhouse and $180,000 of Judy’s Accommodation Bond has been paid, the Centrelink record shows James and Judy as a ‘couple separated by illness’ with financial assets of $170,000 and non income producing assets of $235,000.  Judy would not be required to pay any Income Tested Fee initially.

However her increased Age Pension would not cover her Basic Daily Care Fees plus the interest on the $70,000 of Accommodation Bond outstanding.  Joshua uses all of the $20,000 bank account to pay his mother’s ongoing aged care fees whilst the retirement living villa is sold.  James lends money to cover Judy’s fees when her bank account gets too low.

Once the retirement lifestyle villa is sold, Joshua repays James for the small loan and uses $70,000 to pay the final portion of Judy’s Accommodation Bond.  Judy’s bank account is now restored to nearly $130,000.  Centrelink then increase James’ and Judy’s Age Pensions slightly and impose an Income Tested Fee of about $2.50 per day for Judy’s residential aged care.  Judy now has enough money for Joshua to pay her care fees from her bank account and not to trouble James about money.

James continues to visit Judy and remains on good terms with Joshua.

But what if James and Joshua did not co operate?  The challenges of residential aged care for seniors in new relationships.

The problems could have started with the asset assessment for aged care entry when the ‘partner’ refuses to disclose his asset position.

Another friction point could be a partner refusing to vacate the other’s former home.

Major problems can appear if the ‘couple’ were self funded retirees with no Centrelink involvement but the aged care entrant is expected to make a full disclosure to Centrelink.

If your mature aged family member has entered a new relationship then seek help before entering the aged care maze.  Call Christine at Financial Care Services 03 9808 0338  to arrange an appointment  to discuss your options for residential care  and avoid unnecessary stress.

Coming soon, Supported Residential Services, the privately funded aged care option.

If you would like further confidential, independent and professional advice about Centrelink, lifestyle or financial issues please contact Christine Hopper (03) 9808 0338.

Financial Care Services – call (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. © 2012 Financial Care Services Pty Ltd. All rights reserved.

To make an appointment for professional advice, call Financial Care Services (03) 9808 0338