Robert Ross looks at the harsh realities which make delivering advice around aged care so challenging.
In the world in which I work there are three types of persons. Some are very rich which I will describe as those who are retired and have more than $20 million. Then there are those who are very poor, which in my world, means they are retired but have less than $47,500.
The third type of person has more than the very poor but less than the very rich. They are by far the majority. In my world, the very poor will get aged care services for free, and the very rich can afford to pay for theirs. But, everyone else has a massive funding problem and they don’t even know it. When they do, they will be stunned.
I am not a lawyer, where legal aid can mean the poor pay nothing nor a medical specialist whose skills are legendary but whose services only the rich can afford. I am a retired Certified Financial Planner, 40 years in generational wealth creation, preservation, and estate planning. Now I provide consumers with information about aged care and estate planning.
With my wife and daughter, we have a business called Age Care & Estate Planning Information Services. We give clients facts. Vital information about how their assets affect what they will pay for aged care. We show clients what they can do so they can preserve their estates. We sell nothing and recommend nothing.
We get referrals from financial planners and accountants. They can’t or they don’t know how or they don’t have time, to give their clients information for their own and their parents’ estate planning needs. After we present what various options the clients have to preserve their estates, we often refer them back to the same referrer, if we uncover other needs the clients have or other things they could do. We do not accept commission, or kick-backs. We charge a fee for what we do.
The poor have nothing to preserve, and the rich can afford the best of advice with bespoke wills including tax planned financial structures. Amazingly, the tools that work for the very rich can also work for everyone else. They are not complicated at all.
It’s normal to put off making a will. Despite what is really a ridiculous, fear driven, resistance, after all, if I make a will it means I am going to die, most people finally make a will, even if it’s when they learn they have a serious life-threatening health issue. Of course, they recover. But at least they made a will.
I start with the will. It contains much information they would otherwise find hard to tell me. I can only imagine how difficult it must have been to get them to spit out their wishes to their lawyers.
The will tells me everything I need to know – what they have and what they want to happen to it when they die. It also tells me they know they are going to die. To talk about preserving their estate is much easier if they have a will. It is an important document for me, not just because it exists, but because it tells me what they want to happen to what they own. Even if they had to be dragged kicking and screaming to a lawyer to make a will. That will tells me what they never could. I now know what they want to happen.
Their “house to their wife if she survives for 30 days”. Then “to their children”. Some people just have a house. The will tells me what they want to happen to it.
Is there any one event that could destroy that wish? Yes, there is. It’s residential aged care.
Centrelink never asks to see a client’s will. They just ask what assets they have and calculate what they will have to pay for residential aged care. A room in a nursing home can cost anything, but $500,000 is common. If they own a house, and have no protected person, they have to pay for the room in the nursing home. Sometimes the room costs more than the client’s house.
If their will says, “the house” “where we raised our children” “to my dearest wife”, and after her, the same house “where my children and grandchildren enjoyed a lifetime of memories” –”to our children or grandchildren”, then the house should go to the wife, children or grandchildren. Instead it gets sold.
Imagine the distraught executor, after mum dies – reads the will – and it says- “The house…” What house??
The nursing home industry, and those who for their own reasons support these outrageous costs, are quick to point out that even if the house has been sold to pay the $500,000, it is refundable.
One industry spokesperson said in a Money Management article about aged care on 22 June: “…accommodation payments can be expensive, though I’d emphasise for RADs is the “R” in RAD: that is the refundable nature – that this is a payment that is refundable upon you exiting the particular facility.”
“Exiting” really means dying. This could take years.
A study by the Australian Institute of Health and Wellfare released 19 September 2012 said that “27 per cent of residents in a nursing home would exit within six months, 38 per cent would need care for up to one year, and 44 per cent would need care for up to five years”.
Accommodation can be expensive. You can buy a brand new unit in the Hilton Hotel in Surfers Paradise, lounge, two bedrooms, kitchen and two bathrooms, and four car spaces, for $550,000 and live in it yourself, or get $50,000 a year return. (realestate.com.au) at around the time of writing this article.
You own it – and can keep it for 20 years if you want to – and can sell it after that – and keep the profit.
Just because a RAD might be refundable, does not mean the house is refundable. Once the house is sold it’s gone.
I have never read a will that says, “sell the house to pay for aged care, then give the refunded money to my grandchildren”. Never. Every will I have ever seen says the house ultimately belongs to the children or the grandchildren.
Aged care costs can destroy the wishes of families. Yet it’s so unnecessary.