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Retirement village units & aged care – the value of financial planning: Case Study

Keeping the family home when moving into an aged care hostel can often be the best option. Depending on an individual’s circumstances it may be better for age pension and aged care fees. However sometimes it is not possible to keep the former home due to the family’s financial position.

A large percentage of retirement village contracts, force resident to sell their unit or villa when they are moving into residential care. Determining the best place to invest the proceeds is often very stressful for the family.

Investing the proceeds into a pension deeming bank account or term deposit often increases a person’s nursing home fees and cuts their age pension.

We recently met with Neil, who was in this exact situation. Once Neil sold his retirement villa his age pension would have been cut off. Neil is very conservative and did not want to purchase shares or property. Before seeking aged care financial advice Neil was happy to invest the proceeds from his retirement villa sale into his pension deeming account and term deposits.

This is the story about how we were able to help Neil;

Step 1 – Sell the retirement villa

With the help of Neil’s family and the retirement village management we were able to maximise the amount of money Neil received from his retirement villa sale. After paying all retirement village exit fees, Neil was left with approximately $670,000.

Step 2 – Negotiate a higher accommodation bond

By negotiating with the aged care facility to pay a higher aged care bond we were able to cut Neil’s age care extra service fees by $13,750 per year.

Step 3 – Invest in a Care Annuity

By investing part of Neil’s money into a specialised Care Annuity we were able to minimise Neil’s assessable income. This allowed Neil to receive a part age pension of $6,400 per year.

Neil also received $11,200 per year from the annuity with 100% of his capital to be paid back to Neil in 10 years or to his estate on his death.

What was Neil able to save from seeking financial advice?

By combining a higher accommodation bond payment with a Care Annuity strategy we were able to slash Neil’s age care income tested fees by $10,100 per year.

The combined age care fee savings and increased aged pension Neil received by implementing this strategy is $30,250! This equated to a risk free rate of return of 4.9% p.a. in the first year and over 5% p.a. in subsequent years. This compares to the current rate of return on a term deposit or deeming account of 3.5% p.a.

Do you have a family member going into aged care? Call us to see what’s possible – you might be surprised.

Cheers, Michael

Aged Care Financial Planning | Financial Advisor Aged Care

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