Debbie Sage, Wills and Estates Partner and Accredited Aged Care Professional at Attwood Marshall Lawyers, discusses the “protected person rule”, which can affect how your home is assessed, and what fees and funding you may be eligible to receive when moving into an aged care facility when your spouse or a family member remains in the family home.
Everyone’s health declines at different rates. Sometimes one spouse may need to move into a residential aged care facility while their partner will stay living in the family home. The decision to live separately may be emotional enough, but there is also often confusion over the financial implications involved in such a move.
Moving into an aged care facility can be costly, and the fees vary depending on your circumstances and the type of room you choose at the facility. A resident may pay up to four types of fees – a basic daily care fee, a means tested care fee, an accommodation fee, and an extra services or additional services fee.
Most of these costs are assessed on a case-by-case basis and will depend on your individual circumstances, with the exception of the basic daily care fee which is a fee that is charged to all residents, and the additional services fee can be negotiable at times and is only charged by facilities that have an extra service status.
Appropriate financial and legal advice is imperative when making the transition to aged care, so you can make an informed decision on what options are available for funding the aged care fees and how the different options and strategies may affect your estate and estate planning.
At Attwood Marshall Lawyers, we have dealt with many enquiries from homeowners who have found themselves in a dispute between their family members when transitioning to an aged care facility.
One major concern we often hear is whether the family home will have to be sold to fund the incoming resident’s aged care fees.
There are strict rules around how a person’s income and assets are considered, and the treatment of your home as an asset when transitioning to aged care can be complex. In many cases the family home may need to be sold to fund the accommodation payment and/or to avoid paying higher fees, but there are exceptions when a spouse or family member continues to reside in the family home when a person enters an aged care facility.
Assessing the former home when moving to permanent residential care
When an individual goes into care and their spouse or other family member remains in the home, it can be more complicated than in the case of an individual who lives alone and is transitioning to aged care, or when a couple decides to move in to aged care together or around the same time.
One of the first major hurdles to entering the aged care system is the completion of the Residential Aged Care means assessment, which must be completed to work out if you are eligible to receive a Commonwealth subsidy for all or some of your care and accommodation costs.
It is important to note that care recipients do not have to have their income and assets assessed. If they do not complete the assessment, it means the care recipient will have pay the maximum means tested care fee subject the annual and lifetime caps.
The types of income that will be assessed include income support payments, deemed income from financial assets, net income from rental property/properties, superannuation and overseas pensions, family trust distributions and dividends from private company shares.
In terms of assets, the big question we hear from many families is whether the family home must be included alongside other financial assets such as bank accounts, cash, term deposits, managed investments, shares, foreign assets, and investment properties.
The answer to that question comes down to who is remaining in the home after the homeowner moves into the aged care facility – and more specifically, if they are a “protected person”.
Who is a protected person?
Under aged care legislation, a protected person is:
- The resident’s spouse or partner;
- A dependent child or student;
- A residential carer of at least two years and who is entitled to receive a Centrelink benefit on the day the resident moves into care (they do not have to be a paid carer to be considered a carer in this instance);
- A close relative who has lived with the resident in the home for at least five years and who is entitled to a Centrelink benefit on the day the resident moves into care.
If your home is occupied by a protected person, then your home will not be counted as an asset for the residential aged care means test assessment or the accommodation fees. This exemption would be lost, however, as soon as the protected person moves out of the home or if they no longer qualify for an income support payment.
Usually, the protected person will need to give consent on a Centrelink form for Services Australia/DVA to check their eligibility for an income support payment.
If the protected person rule does not apply, then the value of the home will be included at a capped value in the means test assessment.
The home exemption cap changes regularly. As of 1 January 2024, the capped amount was $197,735.
Examples of scenarios where the protected person rule does and does not apply can be found on the Health Department’s website here.
The protected person rule only applies to the aged care assessment, not for pension purposes which has a different assessment process.
For example, a former home will generally be exempt from the Centrelink/DVA assets test for two years after the individual enters permanent residential care. However, once that two years has lapsed, the home will be assessed at its market value and counted as an asset, which commonly results in the resident’s pension entitlement being significantly reduced or cancelled.
If you think the outcome of your assessment is incorrect, it is possible to ask Services Australia to review the decision.
If the person entering aged care has lost capacity
When someone loses capacity making a has to move to an aged care facility, significant financial implications can come into play.
The situation could become particularly nuanced when there is an adult child or carer still living in the family home, to which the protected person rule may or may not apply.
If you have been appointed an attorney under an Enduring Power of Attorney, it would be prudent to seek professional advice to make sure your decisions will not be to the detriment of the individual to whom you are acting for as attorney. You have a duty to act in their best interests, not the interests of the protected person, unless the Enduring Power of Attorney states otherwise.
An accredited aged care financial planner can provide helpful advice in these circumstances and should be consulted immediately. They can review the financial position of the individual and discuss the options available so that you can make an informed decision that will not result in the incapacitated individual losing or having their pension reduced down the track.
You have a duty as the attorney when making such a significant financial decision to seek the appropriate advice to understand the impact it will have on their aged care fees as well as their pension, because making such a decision without doing so may end up being to their detriment.
Research is key
For more information, one of the best places to look is the government’s “My Aged Care” website, which explains the different services available and what to expect if you or a loved one decide to transition to an aged care facility. The webpage sets out all the different types of care available in Australia and gives some idea of the extent of fees that will be required for each.
Once you know which direction you think you are going to take, the next step is to discuss your intentions with an Accredited Aged Care Professional who can help you understand some of the common financial and legal issues that should be considered when transitioning to aged care.
Getting the right advice as soon as possible is incredibly important. Even though the protected person rule may apply, it may not be in the best interests of the aged care resident to utilise the rule. It will depend on their individual circumstances and their estate plan.
An experienced estate planning lawyer can assist in updating, or drafting a Will and an Enduring Power of Attorney which is often also a requirement when moving into aged care.
A lawyer is best placed to run their eyes over the comprehensive and often complicated service agreements and retirement village agreements that residents must sign when transitioning to aged care before anything is signed.
Attwood Marshall Lawyers – helping you through every stage of life
By speaking to an experienced and accredited aged care professional, you can gain valuable insight into the aged care industry, as well as the financial, legal, and medical decisions you need to make.
Attwood Marshall Lawyers have a dedicated team that practice exclusively in Aged Care and Wills and Estates. For enquiries concerning transitioning to aged care, service agreements, or estate planning advice, please contact Wills and Estates Department Manager, Donna Tolley, on direct line 07 5506 8241, email dtolley@attwoodmarshall.com.au or free call 1800 621 071. We provide a free initial telephone consultation. Call our office today.
