Aged-care complexity continues, despite government reforms


Centric Wealth says bonds now creating most confusion for elderly and their families

Louise Donald

Louise Donald

Leading wealth management advisory firm, Centric Wealth, today said that despite the Federal Government’s Living Longer Living Better reforms, the aged care industry continues to be plagued by complexity and uncertainty, particularly in relation to bonds.

An accommodation bond, or accommodation charge, is payable upon entry to an aged care facility by the majority of residents. The aged care facility holds the bond in ‘trust’ for the resident and uses the interest earned on the bond to assist with general maintenance costs associated with the nursing care facility.

Centric Wealth adviser, Louise Donald, said the aged care reforms aimed at protecting residents, may still cause uncertainty in the community.

“The issue of bonds is understandably confusing for many people.  The failure of a Melbourne nursing home last year, saw 16 families in fear of losing bonds of up to almost $450,000 each.   Fortunately, the Federal Government guarantees bonds, so the families will eventually recover the monies.  However, the incident would have doubtlessly placed considerable stress on some of the most vulnerable people in our community and their families.

“Currently, residents can negotiate their own bond levels.  Paying a higher bond means residents can access higher quality facilities, guarantee placement at a preferred facility, increase the level of means-tested pensions or reduce the required daily fees.  However, from 1 July 2014, all nursing homes must advertise their maximum required bond, therefore negotiating a higher bond than this will not be possible.”

Other changes soon to come into effect include the removal of the distinction between low and high care. Currently, aged care facilities are classified as either ‘low care’ or ‘high care’, with the main difference being the level of care that is provided.  A lump sum bond is generally required upon acceptance in a ‘low care’ aged care facility but there is no bond payable if you are assessed as requiring a place in a ‘high care’ facility, as an accommodation charge is required instead.  However, from 1 July 2014, the reforms will remove this distinction and consequently, there will be a bond payable for all aged care facilities for residents, unless they meet the criteria for exemption.

The amount of bond payable depends on a number of factors, however a key factor is the financial situation of the person entering the home. Currently, the aged care facility can charge any amount of bond as long as the resident is left with at least $44,000 in assets.  The maximum bond payable is dependent on the assets of the person entering the nursing home.

In terms of refunds, upon exit from a nursing home the original bond amount will be returned to the resident or their estate minus a retention amount. The current retention amount deducted from bonds over $39,720 is set at a maximum of $331 per month for a maximum of 60 months ($331 x 60 = $19,860).

“From 1 July 2014, retention amounts will not be deducted from accommodation bonds, rather, the full bond amount will be refunded, which is also reflected in the new name for lump sum bonds from 1 July 2014 – ‘refundable accommodation deposit’.  However, as was evident last year, there are occasions where the bond may be lost.  It should also be noted that residents who elect to pay the bond by interest only instalments will not receive any of this back from the nursing home on exit.”

Ms Donald said; “The last thing most families need when investigating aged care or dealing with an estate, is the surprise of extra costs or lost monies.  That’s why it’s so important to ensure you understand exactly what you need to pay and what entitlements may be available.

“While you can choose to have an asset assessment carried out by Centrelink or the Department of Veteran Affairs, it is worthwhile speaking to a qualified financial adviser before completing any asset assessment forms.”

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