Aged care costs- How can I afford nursing home fees?

No one likes to think about the possibility that one day a family member may have to enter residential care. It's something we would rather not think about. But many people living with chronic disease and dementia will have to move into care at some point.

Finding the money to fund care in an aged care home can be difficult. Most often families have to organise their finances when a crisis occurs. Figuring out nursing home costs, aged care fees and accommodation bonds at such an emotional time can lead to confusion and bad decisions.

I spoke with financial planner Val Nigol co author of Aged Care Homes- The Complete Australian Guide. Val was motivated to write the book when he noticed more and more of his clients were asking about the costs of aged care.

1) Carers often have to access residential care unexpectedly when a crisis occurs. What advice would you give to families who feel pressured into finding a relative a place in an aged care home at short notice?

There are basically two alternatives - do-it-yourself or engage an aged care placement service.  A placement service knows the ropes and can fill an urgent need very quickly for a fee, however, many families prefer to do it for themselves because they know what they want, the topic may have been discussed and agreed previously.

If neither of these alternatives apply, quite often a hospital or the family doctor is a good place to start making enquiries from which to compile a "short list" to either call or visit.  Quite often there is no time and the first available place is accepted.

2) I've heard residential care is very expensive. Do I have to sell the family home to pay for aged care fees and to finance an accommodation bond?

The question of having to sell the family home arises most often when an accommodation bond is payable upon entry into a home, if other financial resources are not available to use for this purpose. 

Bonds can be quite large and out of the reach for many people without having to resort to using their home in some way to help finance it.

This does not necessarily mean that the home has to be sold, it can be used to secure a loan which is then used to pay the bond. Generally speaking, the total of all fees and charges which could be levied in respect of residential aged care is expensive, however, the federal government's policy is that all people needing aged care will receive it irrespective of their financial circumstances.

3) What financial and legal documents will I need to organise before seeing a financial advisor?

It is best to have a copy of the latest Centrelink Income and Assets statement if a person is already receiving a Centrelink Age Pension, similarly with people who receive Veteran's Affairs benefits.  This will provide a good start.

However for those people who do not fall into these categories a copy of their latest tax return, bank statements, investment portfolio summaries, superannuation and account pension statements, and information relating to any property they may own should be taken along to their financial adviser.  An easier way may well be to provide the details of their professional adviser such as an accountant or solicitor.

4) Many families face the prospect of caring for a loved one with dementia over many years. Is it possible to plan ahead for the costs of aged care?

Yes it is.  People living with dementia will generally enter high level residential aged care, this means that an accommodation charge will be payable in addition to the basic daily fee and the income tested fee and depending on the home that is chosen, a bond may become payable as well.

With these expenses on the horizon people should keep their finances fairly liquid and whenever possible set aside surplus funds for this purpose. 

In one case I work with, the parent's home was sold and the funds were invested.  The parent lived with another family member for a while before moving into permanent residential care. The combination of these steps ensured that the family cared for their loved one as much as possible at home, with the benefit of various home assistance services, and the family's finances were maximised.