What happens to the family home when moving into permanent aged care?
It is a common misconception that people are forced to sell their homes to fund a move to permanent aged care.
Depending on financial assets outside the family home, assets can be structured to cover the aged care costs without accessing the home equity. Where there are limited other assets and income available, it often makes financial sense to sell the property to cover the upfront lump sum and ongoing aged care fees.
If the home is sold and proceeds are put towards the upfront costs of aged care, also known as a Refundable Accommodation Deposit (RAD), the value is not counted. However, if there are surplus proceeds once the RAD has been paid, the aged care costs and age pension payment may be impacted.
Below is a summary of the impact your house has on Aged Care costs and Age Pension payments:
Member of a couple with one member staying in the home – aged care exempt from assessment; age pension exempt from assessment
Both members of the couple are in care – home counted up to the home exemption cap each for aged care; age pension exempt for the first two years of permanent care from the date the second member moved into care
Protected Person in the home – aged care exempt from assessment; age pension exempt for the first two years of permanent care
No one remains in the home or person not seen as a Protected Person – home counted up to the home exemption cap each for aged care; age pension exempt for the first two years of permanent care.
The Home Exemption Cap is set at $193,219.20 as of March 20, 2023 is, increasing slightly with CPI each quarter.
Where you are a member of a couple, or have someone living with you in the property, the home may be exempt from the aged care assessment. For the property to be exempt, the home must be occupied by a “Protected Person” at the time of entry to permanent care.
A “Protected Person” includes:
- A spouse
- A dependent child
- A carer who has been living with you in the property for the previous two years and is eligible to receive a means tested payment from Centrelink or DVA, or
- A close relative who had been living with you in the property for the previous five years and is eligible to receive a means tested payment from Centrelink or DVA.
If the Protected Person leaves the home, or loses their means tested payment from Centrelink or DVA, the home will no longer be an exempt asset.
Muirfield Financial Services believe it is imperative to obtain financial advice before making any financial decisions on the home to ensure you are aware of the aged care assessments, and the Centrelink/DVA implications.
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