Nick Bruining: Should you hold or sell the family home when mum or dad go into aged care?

It’s the question most often asked when someone is faced with placing a loved one into aged care: “Do we sell down assets to pay the refundable accommodation deposit or just pay the daily rate?” With RADs ranging from between $150,000 and $550,000, most families will need to look at selling assets such as investment portfolios or even the family home. Emily van Kampen, an independent financial planner and specialist aged care adviser, said families need to be clear about the options available. “The daily accommodation payment might seem to be the more expensive option, but occasionally when you weigh up the costs of actually raising the money to fund the RAD, the DAP may end up being the better choice,” Mrs van Kampen said. If the RAD is to be funded by the sale of assets, there may be capital gains tax implications in the disposal of those assets. “These decisions are usually made when someone is elderly and the usual techniques we might use to mitigate tax liabilities — such as contributing money to super and claiming a tax deduction — don’t apply,” Mrs van Kampen said. The other issue may be that the asset sale could occur at a time when the market is in decline. By waiting a few months, the amount received from the asset sale might be higher, though it could move in the other direction as well. Equally, if the RAD is to be funded by the sale of the family home, there’s likely to be money spent on getting it ready for sale. “Clearing out the property and making it sale-ready is an inevitable process but it can be particularly traumatic for the person concerned and it can be expensive if there’s lots that needs fixing up,”Mrs van Kampen said. The key, however, is to be pragmatic about the likely length of time the person will be in an aged care facility and to weigh-up the total costs of funding the RAD. “If the person is in relatively good health, young and perhaps is moving into care because of dementia, then a longer-term view should be considered and funding the RAD is probably the better choice,” Mrs van Kampen said. “But if the person is elderly, take into consideration the length of time they are likely to be a resident. It may be more financially efficient to pay the daily rate either in part or in full. Bearing in mind that for Centrelink purposes, they will still be regarded as a home-owner for up to two years after they move.” That means they may receive a full or part-pension for two years before the value of the family home is taken into consideration. Existing liquid assets could be used to partially fund the RAD and then the pension used to contribute towards the DAP and the daily care charges.

Nick Bruining: Should you hold or sell the family home when mum or dad go into aged care?

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