A guide to financial planning when moving a family member into residential care

Mother and daughter

By Hannah Meikle, Associate Adviser at Cambridge Partners

The decision to move yourself or another family member into aged care is a significant decision that is often fraught with emotion. As financial advisers, we understand the difficulties involved and can assist with managing the financial aspects to help ensure you or a family member receives the best possible care without jeopardising their – or your – financial stability.

Here are some key things to consider:

Assess the level of care needed

The first step is to determine the level of care required. Residential care facilities offer a range of services, from independent living units to high-dependency care centres.  It’s important to understand what level of care is appropriate to ensure your or your family member’s needs are met and you/they are as comfortable as possible. Evaluating the required level of care may require liaising with healthcare professionals.

It may also be useful to undertake an advanced care planning exercise with your loved ones. Advanced care planning is a process that allows individuals to think about, talk about, and share their preferences and choices regarding their care. It involves considering what matters most to them and what treatments they would or would not want, including end-of-life care. Although these conversations can be difficult, they help those involved feel more in control of their care. For more detailed information and resources, you can visit the Health Quality & Safety Commission New Zealand’s Advanced Care Planning page. You may also find it helpful to complete the Advanced Care Plan Guide workbook.

Research centres and facilities

Research and compare different facilities, to find the one most suitable. You should consider not only the fees but also the quality of care, amenities, location and availability (e.g. vacancies and wait list-times). Make sure to visit all those on your shortlist; reality often differs from the pictures painted by glossy brochures and websites. Talking to residents and reviewing any available independent reports or audits can also be useful.

Consider funding eligibility.

Assess whether you or your family member may be eligible for the Residential Care Subsidy. This subsidy, funded by the New Zealand government, can significantly reduce the cost of care for eligible individuals. It is means-tested, so understanding the criteria for eligibility, the application process, and how assets and income might affect entitlement is essential. Eligibility can be further complicated by family trusts, as well as any gifts or asset transfers made in recent years. The maximum contribution also varies between regions.

Financial management

For those paying privately (or partly privately), residential care can be very expensive. A detailed financial assessment is usually required to determine how best to meet the costs involved. There are several factors to consider when undertaking this assessment:

  • Income: Review your or the family member’s income from all sources, including retirement income, e.g. NZ Superannuation, rental income or income from other investments.
  • Liquid assets: Whether there are liquid assets that could be invested to generate income and what those investments should be.
  • Asset liquidation: Assessing whether assets could be sold or liquidated to cover care costs.
  • Debts and liabilities: Whether you or your family member has any liabilities or debts that may need to be managed or paid-off.
  • Family Contributions: Determine whether financial support from you or other relatives will be necessary or available and the impact on the finances of those contributing.

This is where a financial adviser can provide significant value. The best option will depend on your family’s unique circumstances. There is no one-size-fits-all approach, and a financial adviser can guide you through the process of evaluating the options, cashflow modelling and making an informed decision.

Estate Planning

Moving into residential care is a good juncture to review estate planning documents. It is essential to ensure that Wills, Trusts, and Powers of Attorney are up to date and reflect the current situation and your/the family member’s wishes.

An important aspect to consider is ensuring that Power of Attorney arrangements are in place for both property and personal care and welfare. Powers of Attorney grant a trusted person the authority to make decisions on behalf of the individual who appoints them. This can be crucial for managing financial matters and making personal care decisions if the individual becomes unable to do so themselves. Without these arrangements, the Family Court may have to make decisions about your or your family member’s care and property if you or they lose the capacity to do so. The court’s decisions may not align with your or your family member’s wishes, and the process can be costly and time-consuming. Additionally, many rest homes require Powers of Attorney as a condition of entry.

Admission Agreements

When moving into a rest home, an Admission Agreement must be signed, and legal advice should be sought before signing it. Your lawyer can help you understand the terms and conditions, including fees, your rights and obligations, and any potential implications for estate and future care needs.

Ongoing Financial Management

Once in aged care, ongoing financial management is essential. This includes:

  • Monitoring Costs: Regularly reviewing care costs and ensuring they remain in line with the budget.
  • Managing Additional Expenses: Accounting for additional expenses such as medical treatments or movement to a higher level of care.
  • Reviewing Financial Plans: Regularly reviewing and adapting financial plans to accommodate any changes. This includes reviewing and adjusting your own financial plan if you are contributing to the ongoing costs of family members.

In conclusion, managing the financial aspects of moving into aged care can be challenging and emotional, and the financial burden of aged care can extend beyond the individual receiving care. However, the right planning and guidance can help ensure that you or a family member receives the care needed while maintaining financial stability.

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