Webinar follow up: Assessing the former home when moving to permanent residential care
Grace is a widow and today is the 2nd anniversary of her move to permanent residential care. When she first moved, she was a full age pensioner with $80,000 in her bank account. Her only other asset was her home valued at $825,000. The $80,000 bank account and her home are still her only assets.
Her daughter, Jenny, had lived with her all her life. She receives the full disability support pension and when Grace moved to care, Grace’s son, John, moved back home to care for Jenny.
Recently, Jenny has moved out of the home to an NDIS funded group home. John now continues to live there alone.
Grace’s children paid rent to Grace at the rate of $200 per week ($10,400 per year). This rent just covers the outgoings; rates, utilities, maintenance etc
- When Grace moved to care, would the family home have been assessed as an asset for aged care purposes?
- Does the rental income count towards Grace’s income assessment for aged care purposes?
- Once Jenny moved to the group home, which of Grace’s aged care fees may be affected?
Because Jenny had been living with her mother for more than 5 years and was in receipt of an income support payment from Centrelink, she would qualify as a ‘protected person’. Consequently, while she remains living in the home, it will be excluded from the aged care assets test.
Yes, the rental income does count towards Grace’s income assessment for aged care purposes. However, the rental income less the outgoings reduce the assessable amount to zero, so the rental income won’t have any impact on her aged care assessment.
When Jenny, the protected person, leaves Grace’s former home, the fees that may be affected include:
1. The Daily Accommodation Contribution (DAC) and the equivalent Refundable Accommodation Contribution (RAC)
2. The Means Tested Care Fee
If the protected person leaves the home, does the original agreement with the resident change?
No. However, the home will become an assessable asset at the capped value ($171,535.20 as at 1 July 2020) for the aged care assessment. If the resident was assessed as low means/concessional on the day they entered care, their status will not change. They will continue to be a low means resident, but their DAC will increase to the facility’s maximum accommodation supplement.
If, on their day of entry, they were assessed as a RAD payer, their means tested care fee may increase following the next quarterly review because their assessable assets will have increased by $171,535.20 from the day the protected person left the home.
If a resident who has come into care is 50% owner in their home with their daughter (daughter works so not on any income support payment) and the daughter continues to live in the home,
- Can the daughter be viewed as a protected person for Aged Care purposes rather than having to claim hardship as an unrealisable asset?
- How is this viewed under the age pension rules after 2 years?
Unfortunately, the daughter will not be considered a protected person so the mother will be assessed on 50% of the value of the home but limited to the capped amount of $171,535.20 (as at 1 July 2020). Consequently, if the market value of the home is equal to or greater than $343,070.40 (2 x $171,535.20), she will be assessed as a RAD payer.
Given the above scenario, the home could be considered an unrealisable asset if the daughter did not want to move so she could apply for financial hardship for residential aged care* if/when her other assets fall below $36,827.70 and her income falls below $129.09 per fortnight after meeting her essential expenses (including her aged care fees other than extra or additional service fees).
Again, unfortunately, after 2 years, her share of the home will be assessed at market value for the Age Pension Assets test. However, she will then be assessed as a non-homeowner. Under the Assets test, if her assessable assets were below the lower threshold (as at 1 July 2020 $482,500) she may continue to receive the full pension. If her assessable assets were between $482,500 and $797,500, she would be entitled to a part-pension and her pension would be cancelled if her assessable assets then exceeded $797,500.
* Generally, where there is no substantial change to a client’s financial situation hardship will need to be re-applied for in 12 months.
For aged care purposes are retirement living homes assessed the same as homes in the community?
Yes they are assessed in a similar way. For Aged Care purposes the value of the retirement village (the former home) is based on the ‘estimated exit entitlement’ at date of permanent entry capped at $171,535.20 (as at 1 July 2020) by DVA/Services Australia unless a protected person remains living in the unit.
If the wife moves to care while the husband remains at home and the wife is assessed as fully supported, if the husband subsequently also moves to care, does the wife become a RAD payer?
Each resident is assessed on their day of entry (the day they transition to permanent residential care). Their status of Low Means resident (previously called concessional or supported) or RAD payer is fixed on their day of entry and can only change if they move to another facility and are re-assessed or if they leave the system for 28 days or more.
Therefore, when the husband moves to care, 50% of the home will become assessable to each of them but limited to the capped value ($171,535.20 as at 1 July 2020). Providing the home or retirement village unit is valued is equal to or greater than $343,070.40 (2 x $171,535.20), the husband will be assessed as a RAD payer, but the wife will remain a low means resident. However, she will no longer be ‘fully supported”. Because her assessable assets will have increased by $171,535.20, she will also be required to pay a DAC equal to the facility’s maximum accommodation supplement. She may also be required to pay a means tested care fee.
Next webinar topic:
Your top 3 questions answered