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FINANCIAL CARE SERVICES
Independent aged care, lifestyle and financial advice for seniors
Volume 5 Edition 6 –29 June 2015

Hello

Learning from first year of July 2014 aged care scheme

The July 2014 change in aged care financing rules has required all aged care operators to revise their accommodation charge systems. Fear of bad debts encouraged many aged care providers to enhance their administrative procedures by reviewing their Resident Agreements and fee management systems.

The new system of published maximum Accommodation Room Prices has generated divergent business strategies. Some operators have realistic Accommodation Room Prices which are possibly further ‘negotiable’ in practice. In our observations, commercial operators generally make commercial decisions when negotiating Accommodation Room Prices.

In contrast, other operators have priced every room at the maximum allowable but ‘subject to negotiation’. The old ‘negotiating style’ of fixing the aged care accommodation cost based on the potential resident’s asset value has not disappeared. This negotiating style has generated Accommodation Room Prices of under $150,000 for homeowner aged care entrants whilst other families could not have the ‘fixed’ accommodation prices reduced at all.

Help with negotiating the Accommodation Room Price is available for facility operators and potential aged care residents.

Christine at Financial Care Services understands Commonwealth aged care fee arrangements and the needs of both aged care operators and residents to have good cash flow management.
Christine works with both aged care providers and the families of aged care residents, to negotiate reasonable Accommodation Room Prices and adequate cash flow arrangements.

Contact Christine Hopper or call Financial Care Services on 03 9808 0338 to arrange a consultation. Financial Care Services helps clients understand the financial implications of residential aged care and develop a strategy to generate the cash flow needed.

Financial Care Services is an independent aged care financial advisory service specialising in aged care financing and Centrelink Pensions.

Fear of bad debts has resulted in more Resident Agreements including a specific clause asking the Attorney or VCAT Administrator for the new resident, to guarantee the payment of the aged care fees.

From the viewpoint of the aged care resident’s family, this requirement could look ‘excessive’ when the new resident has significant financial assets and adequate income. In these cases, the Attorney might need to establish a system to pay bills in full and on time.

But the Attorney and family of other aged care residents are greatly challenged by cash flow requirements.
For some families organising cash flow from assets is challenging. The grieving family might be slow in clearing her home of stuff, and preparing it for sale or lease
But generating cash flow from the home could be a major challenge when the aged care resident’s former home is permanently occupied not by “protected persons” but by the extended family of the owner and/or her former “partner”.

Cash flow challenges await the family who agree an Accommodation Room Price well in excess of the value of the aged care resident’s asset value. Interest charges on a small amount of Accommodation Price could be manageable. A serious cash flow challenge could appear when the Age Pension is insufficient for the Basic Daily Fee plus the Means Tested Care Fee. But then how would the resident pay for her discretionary expenses?

Hint Seek financial advice before entering an aged care place with an Accommodation Price in excess of the market value of the former home.
Maybe some tips on negotiating the Accommodation Room Price could avert problems later.

Challenges await the Attorney who agreed to an Extra Service or Additional Service aged care place for a senior with modest financial resources. Indulgence of an Age Pensioner’s little addictions to fresh flowers, elegant clothing, gambling, alcohol or tobacco all drain the bank balance. Suddenly money is not available for the essential pharmacy and basic hairdressing and oops the Direct Debit to the aged care facility fails.
Granny could be distressed if her personal expenses were curtailed but the Attorney who guaranteed her aged care fees could be more upset when asked to cover the gap.

Hint Seek detailed financial advice and Illustrations of potential cash flow needs before accepting an aged care place.

Bad debts arise and aged care facilities try to move on residents who have dissipated their assets.
For example, the lady who sold her home and bought into a granny flat arrangement; a year later an unexpected major stroke necessitated residential aged care. Centrelink count her a having recently gifted almost all of her home sale proceeds resulting in a reduced Age Pension and a significant Means Tested Care Fee. She is also being billed for the aged care Basic daily fee and her aged care Accommodation costs. The aged care facility did not ask her Attorney to sign a Guarantee for her aged care costs and now the debts are mounting.

Hint: Seek specialist financial advice before entering a granny flat arrangement or gifting large sums.
Christine at Financial Care Services is experienced in granny flat arrangements and the potential transition to aged care.

Contact Financial Care Services now for help in designing your granny flat arrangement. Call Christine at Financial Care Services 03 9808 0338 to make an appointment for a consultation.

Read more about exiting a granny flat arrangement before you find yourself in a granny flat agreement.

Financial Care Services is an independent aged care financial advisory service specialising in aged care entrants and retirees with modest financial resources.

Financial Care Services core value in financial advice is to assist with your money plan in the responsible management of your assets to generate the cash flow needed for your lifetime planning. Christine at Financial Care Services understands both the DVA and Centrelink Pensions systems and the Commonwealth aged care fee arrangements.

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

____________________________________________________

Christine Hopper

Director
Financial Care Services Pty Ltd
Independent aged care, lifestyle and financial advice for seniors in Melbourne, Victoria, Australia
Australian Financial Services Licence Number
299570 (check this at www.search.asic.gov.au/fsr/flb.html)
Authorised Representative Number
252529 (check this at www.search.asic.gov.au/fsr/far.html)

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Disclaimer: The information contained in this newsletter 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.

All eligibility for Commonwealth benefits will be determined by Centrelink or DVA, based on your personal position as documented and the legislation and Regulations in force at that time.

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