How partners lose out in aged care move

For many self-funded retirees who have never interacted with Centrelink, a move into aged care is the point where they learn ‘what’s yours is mine’ and vice versa.

It’s a tough time to be entering residential aged care, but for some people there is little or no choice. Caring for someone at home 24/7 under COVID-19 lockdown is definitely taking its toll.

It can be hard enough when one member of a couple has to go into care. But it’s a double whammy when the costs of care for one are so great that the other is left spending any savings just to survive.

For many self-funded retirees who have never interacted with Centrelink, a move into aged care is the point where they learn “what’s yours is mine” and vice versa. In preparing the cost of care assessment for government-subsidised residential care, Centrelink and the Department of Veterans Affairs include the income and assets of the partner of the person going into care as well as the person themselves.

The value of any assets including shares, property and superannuation of both members of a couple is combined, irrespective of whose name they are in, and this amount is then halved to determine the means-tested amount of care that the individual must pay. When a member of a couple is moving into residential care, the only exempt asset is the property they have been living in where the other person intends to stay.

Take Marilyn and Fred, who have been married for 40 years but have always maintained separate finances. Fred is a retired small business owner with a small superannuation balance and a much-loved beach house bought during a previous marriage. As a successful public servant and beneficiary of her parents’ substantial share portfolio, Marilyn has a healthy superannuation income which has largely gone towards meeting their living costs and her grandchildren’s education.

Suddenly, with Fred needing full-time care, they are faced with the reality of perhaps liquidating assets to pay part, or all, of his accommodation or redirecting Marilyn’s income to pay some of the considerable daily costs.

The stress of a loved one going into care is enough to deal with, without the discovery that their partner’s assets will affect the fees to be charged for their aged care. 

Costs of care

There are four possible costs associated with a move into residential aged care, two of which are based on a person’s income and assets.

For starters, each care facility can set its own refundable accommodation deposit (RAD) for a room which typically ranges in price from $500,000 to $1 million in the major cities.

Where a person has more than $173,075.20 in assets (excluding the family home if a protected person is living in it) they are required to pay the full RAD or its equivalent as a Daily Accommodation Payment (DAP) or a combination of both. The DAP is calculated using an interest rate set by the government, currently at 4.04 per cent. Then, the means-tested care fee can be up to $259 a day depending on a person’s income or assets. This fee is currently capped at $28,338 a year.

A basic daily care fee of $52.71 is paid by everyone irrespective of their means and is based on 85 per cent of the single age pension. A final fee for additional or extra services may be charged by some facilities for such things as newspaper delivery and menu choices, of anywhere between $10 and $100 a day.

For the purposes of aged care, a protected person may be a spouse or dependent child who is to remain in the family home, making it exempt in Centrelink’s calculation of assets.

A protected person can also be a carer who is eligible for an income support payment and has been living in the house for two years or more, or a close relation who is eligible to receive income support and has lived in the house for five years or more.

A couple can typically hold under $346,150.40 in combined assets outside the family home before they are required to pay a RAD. How they might pay a RAD without severely affecting the lifestyle of the person not in care will depend on their personal circumstances, including whether they have liquid assets to pay a lump sum.

One of the benefits of paying the RAD up front is it may result in a couple being eligible for the age pension because the RAD is not counted for age pension purposes. If they are eligible for the age pension or part-pension, they would most likely each receive it at the single rate due to being considered a couple separated by illness.

The RAD does count towards the means-tested care fee. Even with annual caps for the care component of living in aged care – currently $47,577.86 a year – the costs can be substantial.

If liquid assets aren’t available to pay a RAD of say, $650,000, then the daily accommodation cost will be an additional $71.90. An additional service fee may add another $30 a day.

The possible daily cost could be between $153.72 and $412 for at least part of a year, depending on a couple’s combined assets and whether they elect to declare all to Centrelink in their SA457 form. It’s not mandatory to complete the SA457 cost of care form – but if you don’t, you could be paying $259 a day until you reach the $28,228 cap.

That’s without taking account of the ongoing expenses for the person remaining in the home, such as rates and utilities, food, transport, medical or care expenses and general living.

There are options to meet these different costs, including sale of assets, revised budgets and cash flow management strategies. Unfortunately, finding ways to meet the costs doesn’t make the move any easier. 

Bina Brown, Third Age Matters