Assyat David

Organising a move into aged care is a stressful and emotional time for an older person and their family. The new aged care rules that came into effect on 1 July are likely to increase the confusion for clients and their families.

“Clients are more likely to need advice to navigate through the new rules, which provides opportunities for advisers to grow their businesses and support clients through this key milestone in their life” said Assyat David, Director at Aged Care Steps.  “Target clients are predominantly retirees and pre-retirees as well as clients with elderly parents” according to Ms David.

“Advisers can add substantial value to clients by allowing clients to outsource the stress to them.  The value of advice is about guidance, objectivity and expertise. It is more than just reviewing finances to implement strategies that improve age pension and minimise aged care fees” Ms David explained.

New residents and their family will be presented with a choice of paying for accommodation as a lump sum (RAD), equivalent daily fee (DAP) or combination with 28 days to make the decision.  “This can be a daunting decision that may have ramifications for the elderly person’s pension entitlement, ongoing care fees, estate planning outcomes and cash flow situation.” said Ms David. Advice is critical to enable the client to make an informed decision to select the option that works best for them and their family.

Advisers may also have opportunities to proactively start the conversation with clients when undertaking regular reviews by introducing a discussion on options for support in the home. “Aged care advice is more than just about moving to an aged care facility.  There are a range of options to consider” David said.

Professional referrers such as lawyers and accountants are finding that clients are turning to them for help to deal with the key decisions involved with aged care.  “Professional referrers and aged care services recognise that clients need advice and are looking to partner with capable financial advisers with the skills and resources to provide aged care advice” said David.

Aged care advice has a large intergenerational element as it enables financial advisers to build relationships with the extended family because the broader family tends to be involved in the aged care process.   “This can provide the impetus for other family members to use the services of the financial adviser to plan ahead for their own needs” said David.

The post New aged care rules boost the advice opportunities for professionals appeared first on AdviserVoice.

Louise Biti

Too often articles and information published on aged care focus on how to reduce the accommodation bond. Many clients (and their families) will also express a reluctance to pay the high bonds required.

The opportunity to initially agree on a low bond can give you a stronger negotiating position to create a positive outcome with fee trade-offs or higher investment earnings. But too much focus is arguably placed on trying to reduce assessable assets to limit the maximum bond payable.

Bond negotiations

The most important aspect of aged care is securing a place in the facility of choice. Strategies that reduce assets or undervalue assets reported may only result in losing the place, or never receiving an offer from the facility of choice.

Most facilities set a target bond range for new residents. This can be influenced by a range of factors, one of which may be how much the client has in assessable assets. It can be difficult to obtain an estimate of the bond from the facility without first providing asset details for the client.

The only rule in legislation in relation to the level of bonds is that after paying the accommodation bond the client needs to be left with at least $44,000 in assessable assets. But what does this mean in practice? And what can go wrong? After all, the rule is designed to ensure that aged care is affordable and the fees for each resident are based on their level of assets and income.

The steps for keeping bond negotiations in perspective are:

Step 1 = What will it take to be offered a place?

Step 2 = Can the person afford this bond?

Step 3 = Does the fee represent value for money?

To see how these steps apply in practice, let’s review the case study below for Faye.

Faye’s dilemma – case study

Faye has become too frail to continue living in her home. She has an Aged Care Assessment Team (ACAT) approval to move into low care. Her daughter Caroline would like Faye to move into a residential facility near her home so it is easy to visit each day.

Caroline has spent time investigating options in her local area and has decided on a facility five minutes from her home. It has a very good reputation and is quite new.

Now, comes the difficult part with negotiating the bond.

This is a new facility and is carrying significant levels of debt used to fund the purchase of land and the building construction. The accommodation bonds are set at a minimum of $500,000 but range up to $650,000 depending on circumstances such as the resident’s level of assessable assets and the size of the room.

Faye’s only assets are her home in a regional town which is valued around $360,000 and $40,000 in the bank.  Her home contents are valued at $5,000 and she does not own a car.

The ACAT team left Faye a copy of the government’s booklet and pack – 5 Steps to Entry to Residential Aged Care. This pack included the Centrelink asset assessment form which Faye completed and sent to Centrelink.

Centrelink will verify the information in the form to calculate her level of assessable assets and the maximum bond she is eligible to pay. The maximum bond is calculated as the assessable assets less $44,000 (figure relevant for entry up to 19 March 2014).

Faye lives alone so her home is counted as an assessable asset for the bond calculations. This puts her assessable assets at $405,000. She receives a letter from Centrelink stating the maximum bond she can pay is $361,000.

A week later, Caroline receives a phone call to say that a place has become available and an appointment is made to discuss the opportunity for her mother to move in. Caroline takes the Centrelink letter to help with her negotiations.

However, this may not result in the outcome Caroline is hoping for. The facility is firm that the minimum bond is $500,000. To admit Faye, they would need to accept a lower bond. As a result, the facility withdraws their offer and offers the place to another potential resident who has a greater level of assets.

This outcome is not dissimilar to the situation with selling a house. If the seller wants a price of $500,000 and the potential buyer can only borrow enough to pay $361,000 the seller does not have to accept this price. They can choose to either drop the sale price to accept the offer or discontinue negotiations and look for a new buyer. The same has happened in this case.

Just because the legislation sets Faye’s maximum bond at $361,000 does not mean the facility has to admit her for this bond level. It just means that if they choose to admit her they do so under an agreement to accept the lower bond.

What could Faye and Caroline have done?

Let’s go back to the steps outlined earlier in this article and review how they may have applied to Faye.

Step 1 = What will it take to be offered a place?

When researching suitable facilities it is important to gain an indication of the bond level required and to understand what flexibility exists in negotiations.

This can be difficult as many facilities are reluctant to quote a bond until they have an indication of the person’s assets. The best strategy is to have an open and honest discussion with the facility. In reality, if Faye had disclosed the level of assets when she put her name on the waiting list she may never have received the call with the offer of a place.

Tip: Newer facilities are likely to be carrying higher levels of debt. This generally means higher bonds and less flexibility to accept a lower bond.

Step 2 = Can the person afford this bond?

In this case, Faye does not have sufficient assets to pay a bond of $500,000. Her family may need to consider whether they can afford to contribute part of the bond if they want to get her into this facility. But do they still have this opportunity when she already has a Centrelink assessment?

If an offer of a place is made and accepted, the person will be asked to sign a Resident Agreement. This is a legal contract between the facility and the resident. It sets out a range of issues including the agreed bond. The bond therefore needs to be paid by the resident, in this case Faye. It cannot be paid directly by anyone else to the facility as the facility is unable to enter into contracts with anyone but the resident.

One solution may be for the kids to gift or loan the money to Faye and deposit it into her bank account before she moves to the facility. She can then request a new assessment from Centrelink based on a change in her circumstances. This strategy is not guaranteed to work as we have seen cases where Centrelink have denied a request to reassess assets within a short period of time.

Gifting/loaning money into Faye’s account will increase her assessable income and assets but she has 14 days to report the change to Centrelink for pension purposes. If the bond is paid within this time it will not impact her age pension payments.

If children are looking at contributing all or part of the bond, the best option may be to not fill in the Centrelink assessment at all, or at least not until after the gift/loan is made to the parent. The Centrelink assessment is optional to obtain, although some facilities will require it before entry.

If the facility agrees, instead of obtaining a Centrelink assessment the person can sign a statutory declaration stating they have sufficient money to pay the requested bond and will be left with at least $44,000 after paying the bond.

If the money from the kids is a loan, they should seek legal advice about drawing up a loan contract so that the money can be recovered from the estate when the bond is repaid. Entering into a loan contract may only be possible if the parent still has full legal (mental) capacity.

Step 3 = Does the fee represent value for money?

While Step 2 has worked through a solution to ensure she can afford to pay the bond, Faye and her family should determine whether the bond represents value for money to them.

What other options might exist for facilities that will accept a lower bond? Are those facilities comparable or is the lower bond coming at the cost of a desirable feature? This is a personal choice and is very similar to how we choose where we will buy a house.

Supported residents

Legislation did not really help or protect Faye, but there are some protection mechanisms for people with very low levels of assets.

Every government-subsidised aged care facility is required to take a minimum number of supported residents. This quota is 15-40% of all subsidised places depending on the socio-economic demographics of the area.

Supported residents are those who have less than $113,784 (current to 19 March 2014) of assessable assets when moving into aged care. These people still need to be left with $44,000 of assets after paying a bond and may incur a lower retention amount (if the bond is less than $39,720).

It is important to understand that the quota applies across all places in the facility. If the facility has both low care and high care places the facility may only take supported residents into high care places. It can therefore still be difficult to secure a low care place even if you are a supported resident.

Helping clients understand bonds

It should also be remembered that bonds are not all bad. Helping clients to understand the implications of bonds may help them to be comfortable with paying the bond.

• Bonds are ggovernment guaranteed
• Bonds are exempt under the Centrelink/Veterans’ Affairs income and assets tests and can help to maximise age pension and minimise daily care fees
• The bond is not a true fee, but rather is a refundable deposit. Each month the facility can deduct $331 (up to a total of $19,860 over a five year period) and the rest of the bond is refundable when the resident leaves or passes away
• Bonds are held in trust by the facility – this can help to protect the estate.

The average new bond is continuing to increase and facilities currently hold over $11 billion in bonds. Bonds are payment for the right to live in the facility and residents have security of tenure for the rest of their lives.

Building your business

There is widespread recognition that clients are ageing at a rate we’ve never experienced before. Older clients and their families are thinking about their future aged care needs and are looking for services to guide the process.

This provides professionals (including financial planners, lawyers and accountants) who service clients of all ages with business growth opportunities to help clients and their families navigate through aged care decisions, to ultimately give them lifestyle choices in the latter part of their life. It also provides a great opportunity to market to pre-retirees, who are the children making the decisions for their parents.

By Louise Biti – Article current 1 December 2013 to 19 March 2014

———————–

Disclaimer: The information contained in this publication is based on the understanding Aged Care Steps Pty Ltd has of the relevant Australian legislation as at the date shown in this publication. The information contained in this publication is of a general nature only and is intended for use by financial advisers and other licensed professionals only. It must not be handed to clients for their keeping nor can any copies of sections of this publication be given to clients. Aged Care Steps is an authorised representative of Strategy Steps Pty Ltd ABN 14130045242 AFSL 333649 and is not a registered tax agent under the Tax Agent Services Act 2009. We recommend that your client be referred to their registered tax agent or legal adviser prior to implementing any recommendations mentioned in this publication.

Note: The accreditation for this CPD article is no longer current. Please visit our CPD section for current CPD quizzes. 

The post Negotiating aged care accommodation bonds – December 2013 update appeared first on AdviserVoice.

Louise Biti

Financial advisers need to arm themselves with aged care strategies in the new year, as the holiday period is likely to prompt clients to question the care needs of their ageing relatives and the financial impacts of this care, says Aged Care Steps (ACS).

“Christmas is a time when families catch up. Adult children may not have seen their ageing parents for a while due to busy lives and distant homes,” says ACS Director Louise Biti.

“At this time, families may begin to notice changes that have developed in their ageing parents since they last saw them. This is especially so if children are spending a number of days with parents as difficulties are harder to cover up over a period of days.”

With the family getting together, the holiday period may be a good time for clients to start planning ahead to ensure adequate plans are in place to access aged care either immediately or in the future. To help with these decisions, they may wish to engage the help of their professional adviser, she says.

“Hard decisions may need to be made and many children and parents will need professional guidance to convert the mountain of data on aged care into meaningful, relevant information and ultimately into appropriate decisions,” she says. “This can be more difficult for siblings who do not see eye-to-eye or have different perceptions.”

According to Biti, aged care is a growing advice opportunity that could help planning businesses to expand as well as assist in building better relationships with clients and other professional networks.

However before advisers can expand these relationships, she says they need to first overcome a number of hurdles including training, pricing and value propositions.

“Advisers don’t feel confident that they know enough about aged care and its complexities to to help their clients,” she says.

“Advisers are not sure how or what they can charge for aged care advice to make it worth their while, especially since the advice may not include any product

recommendation.

“They may have difficult in identifying what their aged care advice proposition is or how to articulate the value to clients.”

Advisers without sufficient skills or resources to address these hurdles in-house can look for support and outsource access key areas of training, paraplanning, strategy development and marketing support.

These are the foundations upon which Aged Care Steps’ business model is built. Advisers who fail to meet the aged care needs of their clients risk losing their clients (and their families) to professionals who can support these clients across all their life stages.

The post Aged care awareness essential for advisers appeared first on AdviserVoice.

Too often articles and information published on aged care focus on how to reduce the accommodation bond. Many clients (and their families) will also express a reluctance to pay the high bonds required.

The opportunity to initially agree on a low bond can give you a stronger negotiating position to create a positive outcome with fee trade-offs or higher investment earnings. But too much focus is arguably placed on trying to reduce assessable assets to limit the maximum bond payable.

Bond negotiations

The most important aspect of aged care is securing a place in the facility of choice. Strategies that reduce assets or undervalue assets reported may only result in losing the place, or never receiving an offer from the facility of choice.

Most facilities set a target bond range for new residents. This can be influenced by a range of factors, one of which may be how much the client has in assessable assets. It can be difficult to obtain an estimate of the bond from the facility without first providing asset details for the client.

The only rule in legislation in relation to the level of bonds is that after paying the accommodation bond the client needs to be left with at least $43,000 in assessable assets. But what does this mean in practice? And what can go wrong? After all, the rule is designed to ensure that aged care is affordable and the fees for each resident are based on their level of assets and income.

The steps for keeping bond negotiations in perspective are:

• Step 1 – What will it take to be offered a place?
• Step 2 – Can the person afford this bond?
• Step 3 – Does the fee represent value for money?

To see how these steps apply in practice, let’s review the case study below for Faye.

Faye’s dilemma – case study

Faye has become too frail to continue living in her home. She has an Aged Care Assessment Team (ACAT) approval to move into low care. Her daughter Caroline would like Faye to move to a residential facility near her home so it is easy to visit Faye each day.

Caroline has spent time investigating options in her local area and has decided on a facility five minutes from her home. It has a very good reputation and is quite new.

Now, comes the difficult part with negotiating the bond.

This is a new facility and is carrying significant levels of debt used to fund the purchase of land and the building construction. The accommodation bonds are set at a minimum of $500,000 but range up to $650,000 depending on circumstances such as the resident’s level of assessable assets and the size of the room.

Faye’s only assets are her home in a regional town which is valued around $360,000 and $40,000 in the bank.  Her home contents are valued at $5,000 and she does not own a car.

The ACAT team left Faye a copy of the Department of Health and Ageing booklet and pack – 5 Steps to Entry to Residential Aged Care. This pack included the Centrelink asset assessment form which Faye completed and sent to Centrelink.

Centrelink will verify the information in the form to calculate her level of assessable assets and the maximum bond she is eligible to pay. The maximum bond is calculated as the assessable assets less $43,000 (figure relevant for entry up to 19 September 2013).

Faye lives alone so her home is counted as an assessable asset for the bond calculations. This puts her assessable assets at $405,000. She receives a letter from Centrelink stating the maximum bond she can pay is $362,000.

A week later, Caroline receives a phone call to say that a place has become available and an appointment is made to discuss the opportunity for her mother to move in. Caroline takes the Centrelink letter to help with her negotiations.

However, this may not result in the outcome Caroline is hoping for. The facility is firm that the minimum bond is $500,000. To admit Faye, they would need to accept a lower bond. As a result, the facility withdraws their offer and offers the place to another potential resident who has a greater level of assets.

This outcome is not dissimilar to someone selling a house. If the seller wants a price of $500,000 and the potential buyer can only borrow enough to pay $362,000 the seller does not have to accept this price. They can choose to either drop the sale price to accept the offer or discontinue negotiations and look for a new buyer. The same has happened in this case.

Just because the legislation sets Faye’s maximum bond at $362,000 does not mean the facility has to admit her for this bond level. It just means that if they choose to admit her they do so under an agreement to accept the lower bond.

What could Faye and Caroline have done?

Let’s go back to the steps outlined earlier in this article and review how they may have applied to Faye.

Step 1 – What will it take to be offered a place?

When researching suitable facilities it is important to gain an indication of the bond level required and to understand what flexibility exists in negotiations.

This can be difficult as many facilities are reluctant to quote a bond until they have an indication of the person’s assets. The best strategy is to have an open and honest discussion with the facility. In reality, if Faye had disclosed the level of assets when she put her name on the waiting list she may never have received the call with the offer of a place.

TIP: Newer facilities are likely to be carrying higher levels of debt. This generally means higher bonds and less flexibility to accept a lower bond.

Step 2 – Can the person afford this bond?

Clearly in this case, Faye does not have sufficient assets to pay a bond of $500,000. Her family may need to consider whether they can afford to contribute part of the bond if they want to get her into this facility. But do they still have this opportunity when she already has a Centrelink assessment?

If an offer of a place is made and accepted, the person will be asked to sign a Resident Agreement. This is a legal contract between the facility and the resident. It sets out a range of issues including the agreed bond. The bond therefore needs to be paid by the resident, in this case Faye. It cannot be paid directly by anyone else to the facility as the facility is unable to enter into contracts with anyone but the resident.

One solution may be for the kids to gift or loan the money to Faye and deposit it into her bank account before she moves to the facility. She can then request a new assessment from Centrelink based on a change in her circumstances. This strategy is not guaranteed to work as we have seen cases where Centrelink have denied a request to reassess assets within a short period of time.

Gifting/loaning money into Faye’s account will increase her assessable income and assets but she has 14 days to report the change to Centrelink for pension purposes. If the bond is paid within this time it will not impact her age pension payments

If children are looking at contributing all or part of the bond, the best option may be to not fill in the Centrelink assessment at all, or at least not until after the gift/loan is made to the parent. The Centrelink assessment is optional to obtain, although some facilities will require it before entry.

If the facility agrees, instead of obtaining a Centrelink assessment the person can sign a statutory declaration stating they have sufficient money to pay the requested bond and will be left with at least $403,000 after paying the bond

If the money from the kids is a loan, they should seek legal advice about drawing up a loan contract so that the money can be recovered from the estate when the bond is repaid. Entering into a loan contract may only be possible if the parent still has full legal (mental) capacity.

Step 3 –  Does the fee represent value for money?

While Step 2 has worked through a solution to ensure she can afford to pay the bond, Faye and her family should determine whether the bond represents value for money to them.

What other options might exist for facilities that will accept a lower bond? Are those facilities comparable or is the lower bond coming at the cost of a desirable feature? This is a personal choice and is very similar to how we choose where we will buy a house.

Supported residents

Legislation did not really help or protect Faye, but there are some protection mechanisms for people with very low levels of assets.

Every government-subsidised aged care facility is required to take a minimum number of supported residents. This quota is 15-40% of all subsidised places depending on the socio-economic demographics of the area.

Supported residents are those who have less than $112,243.20 (current to 19 September 2013) of assessable assets when moving into aged care. These people still need to be left with $403,000 of assets after paying a bond and may incur a lower retention amount (if the bond is less than $39,720).

It is important to understand that the quota applies across all places in the facility. If the facility has both low care and high care places the facility may only take supported residents into high care places. It can therefore still be difficult to secure a low care place even if you are a supported resident.

Helping clients understand bonds 

It should also be remembered that bonds are not all bad. Helping clients to understand the implications of bonds may help them to be comfortable with paying the bond.

• Bonds are government guaranteed
• Bonds are exempt under the Centrelink/Veterans’ Affairs income and assets tests and can help to maximise age pension and minimise daily care fees
• The bond is not a true fee, but rather is a refundable deposit. Each month the facility can deduct $331 (up to a total of $19,860 over a five year period) and the rest of the bond is refundable when the resident leaves or passes away
• Bonds are held in trust by the facility – this can help to protect the estate.

The average new bond is continuing to increase and facilities currently hold over $11 billion in bonds. Bonds are payment for the right to live in the facility and residents have security of tenure for the rest of their lives. 

Building your business

There is widespread recognition that clients are ageing at a rate we’ve never experienced before. Older clients and their families are thinking about their future aged care needs and are looking for services to guide the process.

This provides professionals (including financial planners, lawyers and accountants) who service clients of all ages with business growth opportunities to help clients and their families navigate through aged care decisions, to ultimately give them lifestyle choices in the latter part of their life. It also provides a great opportunity to market to pre-retirees, who are the children making the decisions for their parents.

Article current 1 July 2013 to 19 September 2013

Disclaimer: The information contained in this publication is based on the understanding Aged Care Steps Pty Ltd has of the relevant Australian legislation as at the date shown in this publication. The information contained in this publication is of a general nature only and is intended for use by financial advisers and other licensed professionals only. It must not be handed to clients for their keeping nor can any copies of sections of this publication be given to clients. Aged Care Steps is an authorised representative of Strategy Steps Pty Ltd ABN 14130045242 AFSL 333649 and is not a registered tax agent under the Tax Agent Services Act 2009. We recommend that your client be referred to their registered tax agent or legal adviser prior to implementing any recommendations mentioned in this publication.

Note: The accreditation for this CPD article is no longer current. Please visit our CPD section for current CPD quizzes. 

The post Negotiating aged care accommodation bonds – July 2013 update appeared first on AdviserVoice.

Busy lives and distant homes can make it easy to feel out of touch. Sadly, at this time of year adult children may also begin to notice changes in their ageing parents.

It’s distressing and worrying to accept that parents who were once vital may soon require help to manage their day to day needs. Hard decisions may need to be made and many children and parents will need professional guidance to convert the mountain of data on aged care into meaningful and relevant information and ultimately into appropriate decisions.

Facilitate a family meeting
The New Year is traditionally a time to take stock and plan ahead. Clients with elderly parents may find this time of year is a chance to raise issues with parents in relation to their future well being.

As the thought of this discussion is likely to fill those clients with dread – your professional help may be invaluable.

Did you know?…

Many older Australians live alone and families may not notice the decline in an older person’s ability to live independently. The Christmas/New Year period can be a time when families come together and have an opportunity to observe how well a parent is coping.

Now is an ideal time to get in touch with clients and offer your services. Perhaps you can offer to assist with arranging and running a family meeting.

A family meeting can be an essential step in planning for aged care and may help to minimise conflicts in families. Emotional conflicts between family members can make the transition to care more distressing for an elderly parent and have the potential to rip families apart.

The value of a family meeting
A well run family meeting can allow parents, children and other family members to discuss issues and preferences, express concerns and make decisions that work for the family as a whole.

The earlier families take this step, the better. Planning ahead ensures that parents are fully involved in the decision making and removes some of the stress from other family members. With a well organised plan in place, families can respond more quickly and effectively when an event necessitating a move to aged care occurs.

Your role as trusted adviser can alleviate your clients’ anxieties by providing them with the benefit of your knowledge and professional advice. Your guidance can help them to see the big picture more objectively, allowing them to consider the best options for their parents’ care, security and happiness.

The benefits to you
By helping your clients deal with the aged care system you may:

• Consolidate and enhance your relationship with your clients
• Expand services to your existing clients, resulting in additional opportunities for your business
• Establish relationships with the extended family which can generate additional business opportunities.

Get your Action Plan now
To take advantage of this New Year’s opportunity, contact Aged Care Steps for your Action Plan by sending an email to info@agedcaresteps.com.au and write “Action Plan” in the subject line.

Aged Care Steps is the leading source of aged care advice and support for professionals servicing this rapidly growing market. Aged Care Steps can help you build a profitable service by providing you with comprehensive training, technical back-up, paraplanning support and client marketing tools. Further information can be found at www.agedcaresteps.com.au

The post Aged care client conversation-another year older appeared first on AdviserVoice.

To participate in this growth opportunity, advisers need to:

•             Develop the skills and insights to build an effective aged care advice business

•             Develop processes to provide aged care advice to clients

To view the infographic, click here.

Our one day workshop will provide advisers with the knowledge and practical application of strategies using case studies to help build a profitable aged care service. And, our one day workshop provides 11.5 CPD points.  

Can you afford to miss out on this opportunity?
If not, register for a one-day workshop on Strategic Advice Steps for Aged Care to unlock your business potential. This workshop goes beyond the basics to show you how to provide advice to your clients and develop the skills to build an effective aged care advice business.

The next dates are:

• Sydney – 22 October
• Melbourne – 5 December
• Sydney – 17 December

Book early as numbers are limited. To register email to info@agedcaresteps.com.au with details of which session you are interested in, or express your interest in attending a session in another state.

Aged Care Steps enables professionals to participate in the rising dominance of the aged care market. We provide end-to-end support to set up business, grow business and provide client solutions. Aged Care Steps is supported by its parent company, Strategy Steps. For further information contact us at info@agedcaresteps.com.au

 www.agedcaresteps.com.au

The post Infograph – Stepping into aged care advice appeared first on AdviserVoice.

The workshops, targeted at financial planning professionals, will be led by industry leaders presenting sessions on:

• Integrating trust into your advice process presented by The Tax Institute
• Building your Aged Care value proposition presented by Aged Care Steps
• Planning for death in SMSFs presented by Cavendish

Each session is focused on providing financial planners with tools to help give good advice.

The workshops are designed to commemorate the FPA’s historical two decade milestone and will replace the signature National Conference for 2012 only.

Taking place in Capital City locations around the country during November and December this year, these workshops intend to reflect a new structure the FPA has implemented which ensures attendees achieve maximum educational benefits. The workshops attract 6 FPA CPD points, and as a reflection of their advanced technical standard and a first for FPA CPD content, also attract 6 SPAA CPD points.

The FPA has received strong and positive feedback from members, encouraging a revitalised approach and the success it has delivered to date. The FPA exclusive Shadow Shopper workshop initiative held throughout May with ASIC and FOS representatives received an outstanding response from members with over 700 attending with 90% satisfaction rating.

Mark Rantall, CEO of the FPA said:

“The FPA is delighted to announce another number of education workshops to assist financial planners provide better financial advice to their clients. Continuous education is vital for all financial planners to progress in their careers and provide clients with up to date professional and trusted advice. These workshops are about improving technical expertise; these workshops are about ensuring attendees achieve maximum benefit; these workshops are not about selling products.

“We are responding to the needs of our members with an increased schedule of regional events that reaches our members where they are and restructuring our workshops to ensure all attendees get maximum benefit and are educated on topics and issues that are not covered elsewhere in the profession. Our efforts are all about improving the quality of advice consumers receive from financial planners.”

Following the education workshops, attendees will be invited to join the FPA celebrate 20 years of raising the bar for the profession with the FPA Best Practice Awards presentation and complimentary Champagne Reception.

To register for the workshops, please email events@fpa.asn.au

The post Education workshops mark financial planning history appeared first on AdviserVoice.

Too often articles and information published on aged care focus on how to reduce the accommodation bond. Many clients (and their families) will also express a reluctance to pay the high bonds required.

The opportunity to initially agree on a low bond can give you a stronger negotiating position to create a positive outcome with fee trade-offs or higher investment earnings. But I would argue that too much focus is placed on trying to reduce assessable assets to limit the maximum bond payable.

Bond negotiations
The most important aspect of aged care is securing a place in the facility of choice. Strategies that reduce assets or undervalue assets reported may only result in losing the place, or never receiving an offer from the facility of choice.

Most facilities set a target bond range for new residents. This can be influenced by a range of factors, one of which may be how much the client has in assessable assets. It can be difficult to obtain an estimate of the bond from the facility without first providing asset details for the client.

The only rule in legislation in relation to the level of bonds is that after paying the accommodation bond the client needs to be left with at least $40,500 in assessable assets. But what does this mean in practice? And what can go wrong? After all, the rule is designed to ensure that aged care is affordable and the fees for each resident are based on their level of assets and income.

The steps for keeping bond negotiations in perspective are:

Step 1  – What will it take to be offered a place?
Step 2  – Can the person afford this bond?
Step 3  – Does the fee represent value for money?

To see how these steps apply in practice, let’s review the case study below for Faye.

Faye’s dilemma – case study
Faye has become too frail to continue living in her home. She has an Aged Care Assessment Team (ACAT) approval to move into low care. Her daughter Caroline would like Faye to move to a residential facility near her home so it is easy to visit Faye each day.

Caroline has spent time investigating options in her local area and has decided on a facility five minutes from her home. It has a very good reputation and is quite new.

Now, comes the difficult part with negotiating the bond.

This is a new facility and is carrying significant levels of debt used to fund the purchase of land and the building construction. The accommodation bonds are set at a minimum of $500,000 but range up to $650,000 depending on circumstances such as the resident’s level of assessable assets and the size of the room.

Faye’s only assets are her home in a regional town which is valued around $360,000 and $40,000 in the bank.  Her home contents are valued at $5,000 and she does not own a car.

The ACAT team left Faye a copy of the Department of Health and Ageing booklet and pack – 5 Steps to Entry to Residential Aged Care. This pack included the Centrelink asset assessment form which Faye completed and sent to Centrelink.

Centrelink will verify the information in the form to calculate her level of assessable assets and the maximum bond she is eligible to pay. The maximum bond is calculated as the assessable assets less $40,500 (figure relevant for entry up to 19 September 2012).

Faye lives alone so her home is counted as an assessable asset for the bond calculations. This puts her assessable assets at $405,000. She receives a letter from Centrelink stating the maximum bond she can pay is $364,500.

A week later, Caroline receives a phone call to say that a place has become available and an appointment is made to discuss the opportunity for her mother to move in. Caroline takes the Centrelink letter to help with her negotiations.

However, this may not result in the outcome Caroline is hoping for. The facility is firm that the minimum bond is $500,000. To admit Faye, they would need to accept a lower bond. As a result, the facility withdraws their offer and offers the place to another potential resident who has a greater level of assets.

This outcome is not dissimilar to someone selling a house. If the seller wants a price of $500,000 and the potential buyer can only borrow enough to pay $364,500 the seller does not have to accept this price. They can choose to either drop the sale price to accept the offer or discontinue negotiations and look for a new buyer. The same has happened in this case.

Just because the legislation sets Faye’s maximum bond at $364,500 does not mean the facility has to admit her for this bond level. It just means that if they choose to admit her they do so under an agreement to accept the lower bond.

What could Faye and Caroline have done?

Let’s go back to the steps outlined earlier in this article and review how they may have applied to Faye.

Step 1 What will it take to be offered a place?

When researching suitable facilities it is important to gain an indication of the bond level required and to understand what flexibility exists in negotiations.

This can be difficult as many facilities are reluctant to quote a bond until they have an indication of the person’s assets. The best strategy is to have an open and honest discussion with the facility. In reality, if Faye had disclosed the level of assets when she put her name on the waiting list she may never have received the call with the offer of a place.

Tip: newer facilities are likely to be carrying higher levels of debt. This generally means higher bonds and less flexibility to accept a lower bond.

Step 2 Can the person afford this bond?

Clearly in this case, Faye does not have sufficient assets to pay a bond of $500,000. Her family may need to consider whether they can afford to contribute part of the bond if they want to get her into this facility. But do they still have this opportunity when she already has a Centrelink assessment?

If an offer of a place is made and accepted, the person will be asked to sign a Resident Agreement. This is a legal contract between the facility and the resident. It sets out a range of issues including the agreed bond. The bond therefore needs to be paid by the resident, in this case Faye. It cannot be paid directly by anyone else to the facility as the facility is unable to enter into contracts with anyone but the resident.

One solution may be for the kids to gift the money to Faye and deposit it into her bank account before she moves to the facility. She can then request a new assessment from Centrelink based on a change in her circumstances. This strategy is not guaranteed to work as we have seen cases where Centrelink have denied a request to reassess assets within a short period of time.

Gifting money into Faye’s account will increase her assessable income and assets but she has 14 days to report the change to Centrelink for pension purposes. If the bond is paid within this time it will not impact her age pension payments.

If children are looking at contributing all or part of the bond, the best option may be to not fill in the Centrelink assessment at all, or at least not until after the gift is made to the parent. The Centrelink assessment is optional to obtain, although some facilities will require it before entry.

If the facility agrees, instead of obtaining a Centrelink assessment the person can sign a statutory declaration stating they have sufficient money to pay the requested bond and will be left with at least $40,500 after paying the bond.

Step 3 Does the fee represent value for money?

While Step 2 has worked through a solution to ensure she can afford to pay the bond, Faye and her family should determine whether the bond represents value for money to them.

What other options might exist for facilities that will accept a lower bond? Are those facilities comparable or is the lower bond coming at the cost of a desirable feature? This is a personal choice and is very similar to how we choose where we will buy a house.

Supported residents
Legislation did not really help or protect Faye, but there are some protection mechanisms for people with very low levels of assets.

Every government-subsidised aged care facility is required to take a minimum number of supported residents. This quota is 15-40% of all subsidised places depending on the socio-economic demographics of the area.

Supported residents are those who have less than $108,266.40 (current to 19 September 2012) of assessable assets when moving into aged care. These people still need to be left with $40,500 of assets after paying a bond and may incur a lower retention amount (if the bond is less than $38,760).

It is important to understand that the quota applies across all places in the facility. If the facility has both low care and high care places the facility may only take supported residents into high care places. It can therefore still be difficult to secure a low care place even if you are a supported resident.

Helping clients understand bonds
It should also be remembered that bonds are not all bad. Helping clients to understand the implications of bonds may help them to be comfortable with paying the bond.

• Bonds are government guaranteed
• Bonds are exempt under the Centrelink/Veterans’ Affairs income and assets tests and can help to maximise age pension and minimise daily care fees
• The bond is not a true fee, but rather is a refundable deposit. Each month the facility can deduct $323 (up to a total of $19,380 over a five year period) and the rest of the bond is refundable when the resident leaves or passes away
• Bonds are held in trust by the facility – this can help to protect the estate.

The average new bond is continuing to increase and facilities currently hold over $11 billion in bonds. Bonds are payment for the right to live in the facility and residents have security of tenure for the rest of their lives.

Building your business
There is widespread recognition that clients are ageing at a rate we’ve never experienced before. Older clients and their families are thinking about their future aged care needs and are looking for services to guide the process.

This provides professionals (including financial planners, lawyers and accountants) who service clients of all ages with business growth opportunities to help clients and their families navigate through aged care decisions, to ultimately give them lifestyle choices in the latter part of their life. It also provides a great opportunity to market to pre-retirees who are the children making the decisions for their parents.

Can you afford to miss out on this opportunity?
If not, register for a one-day workshop on Strategic Advice Steps for Aged Care to unlock your business potential. This workshop goes beyond the basics to show you how to provide advice to your clients and develop the skills to build an effective aged care advice business.

The next dates are:

• Sydney – 22 October
• Melbourne – 5 December
• Sydney – 17 December

Book early as numbers are limited. To register email to info@agedcaresteps.com.au with details of which session you are interested in, or express your interest in attending a session in another state.

Aged Care Steps enables professionals to participate in the rising dominance of the aged care market. We provide end-to-end support to set up business, grow business and provide client solutions. Aged Care Steps is supported by its parent company, Strategy Steps. For further information contact us at info@agedcaresteps.com.au

Note: The accreditation for this CPD article is no longer current. Please visit our CPD section for current CPD quizzes. 

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