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Unfortunately for most of us there will come a point in our lives when we are unable to stay in our own homes or care for ourselves. If our partners have passed this sometimes means that family members are the only one’s left to take us in and in most cases this is not a suitable arrangement. Which leaves the over 50’s resorts, as I like to call them.
It used to be the case that if an older person required care they were forced into a nursing home, this is no longer always the only solution with many villages now available that offer high care for those who still wish to live independently, unfortunately they do come at a cost.
- Initial purchase or entry price of room or property.
- Ongoing management fees (usually weekly or monthly, like rent).
- Cost of meals (if they are provided).
- Cost of medical care, cleaning and laundry (you can sometimes outsource this to places like Blue Care and it will be cheaper).
My grandfather lived in one of these fabulous places for three years before he passed away and I have to say he loved it. The social atmosphere and the care he received was second to none. The only issue I found was that once he was in there fees just kept going up and up to the extent that some residents had to move out as they could no longer afford to stay. Every pension increase was absorbed by an increase in fees but it was when he passed that the real surprise came and we received the following statement:
|vacant possession date||2/07/2012|
|deferred management days||962|
|original buy price||$247,500.00|
|estimated exit sale price||*$ 270,000.00|
|reinstatement works costs (allowance)||*$ 2,000.00|
|general services and personal charges (allowance)||*$ 1,000.00|
|total amount outstanding||*$ 3,000.00|
|Final estimate calculation|
|estimated exit sale price||*$ 270,000.00|
|deferred management fee||$65,231.51|
|50% capital growth||*$ 11,250.00|
|less outstanding payments||*$ 3,000.00|
|estimated exit entitlement||*$ 190,528.49|
Which means that despite the unit going up in value the family will lose nearly $57,000 while the village in which he lived will profit by $79,500 purely for having him live there. This is on top of his weekly rent, meals and care fees, so as you can see they are not cheap to live in. In Australia about 90 per cent of village units are now occupied on long-term leases using a deferred management fee structure. A rule of thumb is that you’ll contribute $10 a day towards village running costs but the more facilities a village provides, the higher the ongoing fees. Some operators may charge lower recurrent fees but offset this with a higher departure fee.
While fees will differ greatly amongst establishments read the fine print carefully before buying into these types of places, as while some may appear cheap on the surface they may greatly impact upon the wealth of your estate on your passing. The quality of life my grandfather lived before his passing though, far outweighed any loss from fees.
Things to consider before buying into a retirement village or aged care facility
Do you need an ACAT assessment?
ACAT stands for Aged Care Assessment Team. These teams perform assessments on those who have reached a certain age and need either help at home or are considering moving into an aged care facility. Assessments are free and a performed if you want to:
- access aged care services through any type of Home Care Package
- receive services through the Transition Care Program
- receive certain respite services
- enter into an aged care home.
An ACAT assessment will determine what level of care you require and how much government assistance you can receive. You can receive government assistance for services in your own home or within a facility.
Once your level of care is determined you can then look at where to purchase. If you are unable to purchase within a private facility there are government facilities available that usually conveniently set you back the cost of your pension each week.
There are hundreds of private facilities around Australia but sometimes finding a vacancy isn’t easy. A one bedroom unit in and around Brisbane will set you back anywhere between $100K and $300K depending upon the facility and the services that they have to offer.
Here is a recent example of a family member:
If June sells her house and buys a retirement unit that is less then $142,500 she is deemed not to own a home and will receive rent assistance and can have $339,250 in the bank but the amount must be kept under this as interest is deemed an asset.
If she sells her house and buys the $180,000 unit at the retirement village she is looking at she can have $196,750 in the bank (again interest is considered income) She can earn up to $156 per fortnight and still receive a full pension.
So say she sells her home for $430,000 and buys into said retirement village for $180,000 this leaves her with $250,000 (less legals and real estate fees). In order to get her full pension she is going to have to ‘gift’ her children the maximum $10,000 each reducing this down to $210,000, which will leave her with a partial pension.
Weekly expenses at said facility are: $365.35 and included three meals a day, some onsite activities, management fees and emergency pendant. The maximum most facilities can take upon exit is 35% of the sale price.
If you are considering entering one of these facilities please read the contract carefully and ensure that you can afford the ongoing expenses that will increase over time.
Important information about assets test
Some assets are deemed to earn income, while certain assets are not included in the assets test. Assets test limits also apply to the transitional rate of pension.
Chart A – assets test limits for allowances and full pensions
|Family situation||For Homeowners||For Non-homeowners|
|Illness separated (couple combined)||$279,000||$421,500|
|One partner eligible (combined assets)||$279,000||$421,500|
Extra allowable amount for retirement village and granny flat residents
If your entry contribution is equal to or less than the extra allowable amount at the time of entry, you are assessed as a non-homeowner. Your entry contribution will count as an asset. You may qualify for rent assistance. The extra allowable amount is the difference between the non-homeowner and the homeowner asset test limits, currently $142,500.