To sell or keep the family home?
For many older Australians, the time will come when they need to move out of their homes and into an aged care facility. One of the most important questions to answer is what to do with the family home? Should it be retained or sold, and how will this impact their personal situation?
Priorities to focus on should include the following:
- Finding an aged care facility that offers the right standard and level of care.
- Determining if it is affordable. For anyone on a full age pension, 85 per cent of the pension will go towards the basic daily fee and nothing else is payable. Everyone else faces an income and assets test.
- Deciding on your preference – keep or sell the house?
- Working through your financial options. Don't rely on the aged care provider to do this. Consider seeking advice from an independent financial planner who specialises in aged care.
Tighter means testing on accommodation and ongoing care costs from 1 July 2014 mean you cannot afford to make an uninformed decision about the family home when entering an aged care facility.
The rule changes centre around how the cost of accommodation will be funded – via a daily payment or a refundable accommodation payment. This decision will affect all clients. In contrast, entry into an aged care facility prior to July 2014 required an accommodation bond.
Options still exist from 1 July 2014. Clients with low assets and income may have no choice but to sell their home to pay for their accommodation and care costs. However, for other clients, the choice of retaining (and renting) or selling their former home is still a crucial decision.
You or your adviser need to understand the new rules and model the different outcomes for the various options, bearing in mind your goals and objectives.
In any case, the changing landscape of residential aged care with tighter means testing heightens the need to seek financial advice. You need to plan ahead to ensure you can afford the desired level of care and make informed choices when it comes to planning around one of the largest assets – the family home.
Related links:
Top rules for retirement savings
What you need to know about super and tax
What should I do with my superannuation?