If the time has come to consider a move into residential aged care, you and your family are likely to be faced with significant financial decisions. If you have a self-managed super fund (SMSF), there can be an extra layer of complexity.
The good news is that planning ahead and financial advice can provide choices and help avoid some of the stress.
Here are five things worth considering.
1. How will you pay for your room?
Room prices vary but average just over $600,000 across Australia. And with choices on how to pay, it is important to understand your options and the implications of each one.
You will have a choice to pay a lump sum, known as a Refundable Accommodation Deposit (RAD), make ongoing Daily Accommodation Payments (DAPs), or use a combination of the two.
You should seek advice to run the numbers on cashflow and overall wealth position to decide which option might work best for you.
2. Could your super help fund the move?
Your SMSF may be one of your largest financial assets, so it shouldn't be overlooked when considering how to fund aged care.
You might consider withdrawing money from super to help pay a RAD rather than selling other investments, especially as these withdrawals are tax-free after age 60.
But before withdrawing money, it is important to understand what you may be giving up. The lump sum is mostly refundable when you leave care, but if you have taken it out of your SMSF, you won’t be able to put it back in.
3. Don't forget about tax after death
Your super may be tax-effective while you are alive, but tax may be payable when it passes to beneficiaries such as adult children. The potential tax consequences for your estate might influence whether retaining money in super or using it to fund aged care is the better strategy.
It is also a good time to review your binding death benefit nominations and broader estate planning arrangements.
4. Who will manage your SMSF if you can't?
One of the most important questions is also one of the easiest to put off - what happens if you can no longer manage your own financial affairs?
If illness or declining capacity means you can no longer perform your role as SMSF trustee, it is critical to have an appropriate enduring power of attorney in place so that person can take over the legal responsibilities.
Think carefully about who you appoint. They may ultimately have considerable control over one of your largest assets.
5. Rethink the structure
For some people, this planning process may raise another question: is an SMSF still the right structure for the next stage of life? This thinking will be impacted by the reasons why you set up an SMSF and the benefits it offers you – and every person needs to consider this for their own situation.
Need help with aged care decisions?
These are not decisions you should make alone. We offer licensed and specialist aged care advice, to help you make the right choices. If you'd like to talk through your situation or understand your next steps, contact us today on (08) 8223 6880 to discuss your situation.
IMPORTANT INFORMATION: Denise Kipling (ARN 235861) is an Authorised Representative of Financial Success SA Pty Ltd (ACN 105 603 058) ATF the Financial Success Trust ABN 68 114 614 838 t/as Financial Success specialising in Aged Care Financial Advice is a Corporate Authorised Representative No 235520 of InterPrac Financial Planning Pty Ltd AFSL 246638 ABN 14 076 093 680. The advice contained in this document is of a general nature and has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on the advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs; obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS and seek financial advice. No responsibility is taken for persons acting on the information within this document. Persons doing so, do at their own risk.