Navigating aged care dilemmas: What happens when a loved one has dementia?

Question: My parents are a couple in their mid 80’s and my Dad has dementia. He presently receives a Level 4 home care package but I can see a time where Mum will not be able to look after him. Apart from their home which is probably worth over a million dollars, they have about $600,000 in super, savings and shares. What will happen if Dad moves into aged care and will Mum have to sell the house ?

Answer: You parent’s position is very common and fortunately, the very complicated system accommodates these variations but with the underlying principle, that if you are in a position to either fully or partially fund your own retirement and aged care costs, you are compelled to do so through the application of meant tested support and benefits.

Bear in mind that you need to work your way through two systems. Centrelink deals with income and concessions. Myagedcare, a department of the Health Ministry, deals with aged care accommodation and aged care daily care costs.

Given their existing asset position, they are only receiving a part pension at present. While they should seek their own financial advice from a specialist aged care financial planner, the critical issue once Dad moves into aged-care, will be Mum’s cash-flow requirements and how they are funded.

If they decide to cash-in much of the super to meet the costs of the Refundable Accommodation Deposit (RAD) and assuming the RAD exceeds about $180,000, Mum will then only have the leftover amount in super to generate additional income to top up her pension. RAD’s typically range form about $150,000 to $550,000 depending on location and the type of room selected for Dad. By paying the full RAD, they won’t need to make any other payments towards accommodation.

As they will be regarded by Centrelink as being separated by illness, Mum will come under the various means test thresholds applicable for a couple and will probably be receiving the full rate of single pension, currently $1,096.70 a fortnight. When separated by illness, each member of a couple receives the singe rate of pension instead of the couple’s rate.

The daily care fee for Dad is a separate calculation to the accommodation costs. The basic cost is set to 85 percent of the current single rate of basic pension which works out to be roughly, $61 a day at present. The facility you choose may also charge an “extra services fee” which is often around an extra $20 per day. How much Dad has to contribute to the total daily cost will be based on the financial assets they currently have.

Fortunately, because Mum is still at home and they have been living together for many years, the home value for now, is excluded in any calculations.

While the money paid as a RAD is exempt from Centrelink calculations, it is included in Dad’s daily aged care fee calculations.  Even if the RAD is $550,000 the estimated daily care fee Dad will have to pay is the $61 a day figure (assuming no extra service fee).

Given that he will also be receiving $1,096.70 a fortnight from Centrelink, that works out to be $78 a day which covers the $61 a day care fee, leaving a small surplus which might go towards the daily “extra service” fee if applicable.

The situation will change significantly if Mum moves into aged care. In this case, the home will remain exempt from Centrelink asset testing purposes for 2 years after the move, but a capped amount will be included in her daily aged care fee calculations.

Instead of paying the RAD for Mum at that time, a better scenario might involve renting the property out and the net rent received, might be enough to cover the costs of a Daily Accommodation Payment in full. You would need to re-assess this after 2 years because from that point, the value of the home will be included in Centrelink’s asset test. It is likely that both Mum and Dad will lose their pension and you will almost certainly need to sell the house to cover the costs.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.