This posting – as with the previous posts; and the remaining posts in this series – are provided to assist families with the decision-making process when it becomes apparent/ obvious that a senior member of the family is going to require accommodation in an aged care facility: whether that be in a ‘low level care’, ‘high level care’ or extended services facility. In this post we investigate in greater detail the rules, asset assessments and payment options that apply to accommodation bonds.
Aged Care Accommodation Bonds
As outlined in the first of this series of posts, when people enter low level aged care or an extra service facility, they will generally be asked to pay an accommodation bond. The amount of the bond is negotiated with the facility and can be a significant amount, particularly in metropolitan areas. A financial planner is often engaged to assist families resolve the question of how to fund the accommodation bond.
What are accommodation bonds?
An accommodation bond is an interest-free loan to the facility which must be used to improve building standards and the quality and range of services provided.
Both low level care (hostels) and extra service facilities (hostels or nursing homes which provide a higher standard of accommodation or services) can charge an accommodation bond.
The aged care facility may invest the bond and retain any interest received. The facility also deducts a monthly retention amount from the bond for up to five years. The maximum retention amount is currently $299 a month ($3,588 per annum). This amount is fixed at the date of entry. The balance of the bond is refunded to the client or their estate when they leave the home. The bond must be refunded within 14 days otherwise the facility must pay interest on the outstanding amount.
How much are accommodation bonds?
The Government does not prescribe the maximum accommodation bond that can be charged. The amount of the bond is negotiated between the facility and the resident and is determined by property values in the area, services provided and the quality of the accommodation.
The average accommodation bond2 in Australian major cities is around $300,000 and in regional areas around $180,000. Bond amounts vary widely so it is worth shopping around – but it is important to remember the criteria that determines the price at any individual facility3.
The Government prescribes the minimum amount of assets that a client must be left with after paying the bond. Currently this amount is $37,500.
For clients who cannot afford a full accommodation bond the Government provides an “accommodation supplement” to the facility and ensures that a designated number of places are available. Supported residents are residents who entered care after 20 March 2008 with assets below $93,410.40. Supported residents with assets below $37,500 pay no bond, while clients with assets between $37,500 and $93,410.40 pay a partial bond.
What if they move facilities?
As the amount of the accommodation bond is determined at the time of entry to the facility there are protections in place for residents who move facilities.
Residents, who move to another low level care or extra service facility within 28 days of leaving the first facility, cannot be asked to pay the second facility more than the amount of the outstanding bond. The balance of the five year retention period (if any) will carry over to the second facility.
Residents who move to high level care (nursing home) that is not an extra service facility, have the choice (with the agreement of the second facility) of either:
- having the bond balance refunded and a new assets assessment undertaken to see if they need to pay an accommodation charge to the second facility; or
- transferring the bond balance to the second facility. The balance of the retention period (if any) will carry over to the second facility.
Financial Planners can help families understand the options when interacting with aged care facilities
Families will benefit from consulting with financial planners4/advisers who have experience in this area of substantial emotional and financial anxiety. Financial planners can ensure that helpful advice is made available to elderly parents, relatives, friends and even their extended community. There are many real life cases of clients benefiting from a consultation and engagement of a financial planner experienced in this area of advice.
1Posting 3 in a series of 4 Blogs about preparation for the transition from home to an aged care facility for accommodation and care needs for the aging/ aged.
2These figures were current as at May 2010.
3Progression within the facility from ‘low level care’ through that with ‘extra services’ and eventually to ‘high level care’ may be important to the comfort and well-being of the family member(s) concerned. Careful investigation and understanding of the moves involved should be made/ attained.
4Continuum Financial Planners Pty Ltd has experienced planners available to assist families in making the most appropriate decision in your circumstances.
Adapted from articles written by Cecile Apolinario, ThreeSixty; and Pinnacle Financial Services Academy – under the title ‘Aged Care Strategies’ in the April and May, 2010 issues of a financial planning industry journal.
