Assessment of the Former Home When Entering Aged Care

Navigating Key Considerations

When moving into residential aged care, a critical consideration for many is deciding what to do with the family home. Whether the home is retained, sold, or rented out, each choice impacts Age Pension entitlements, means-tested care fees, and Government support eligibility for accommodation costs.

In this article, we break down essential information on assessing the former home, covering general social security and aged care means testing, along with various family situations. This guide aims to help individuals and families make informed decisions based on current Australian regulations as of 20 September 2024.

Deciding What to Do with the Family Home in Aged Care 

For individuals transitioning into residential aged care, the decision regarding their home carries both emotional and financial weight. The choice to retain, sell, or rent out the property impacts not only the aged care means test but also Age Pension entitlements and government support eligibility.

Here, we outline the effects of different choices regarding the family home when entering aged care, specifically regarding means testing, assessable assets, and how various options may work under different family circumstances.

Key Considerations for Means Testing and Age Pension 

The way your former home is assessed for means testing depends significantly on whether it is retained, sold, or rented out.

1. If You Retain the Home 

Keeping the former home when moving into aged care involves the following assessments:

• • Exemptions and Asset Testing: The family home is exempt from asset testing for up to two years after entering residential aged care.
  • Impact on Means-Tested Care Fees: If retained, the home’s value is capped at $206,039.20 (as of 20 September 2024) for means-testing purposes.
  • Age Pension Eligibility: Retaining the home may offer a strategic advantage for those seeking to maximise their Age Pension entitlements. 

2. If You Sell the Home 

Selling the former home brings its own set of financial consequences, including:

• • Means-Tested Care Fees: Proceeds from the sale are included as assessable assets and may increase means-tested care fees.
  • Gifting Rules: Any gifts made from sale proceeds exceeding $10,000 in a single year may reduce Age Pension benefits due to gifting rules. 

3. If You Rent Out the Home 

Renting out the home can offer a balanced approach, with some of the main considerations including:

• • Exemptions from Assessable Income: Net rental income from the former home may still be included for income-testing purposes.
  • Rental Income Implications on Age Pension: Rental income impacts Age Pension eligibility and may be reduced based on assessable income thresholds. 

Family Situations and the Former Home Assessment 

The presence of a spouse, dependent children, or other family members can influence decisions about the former home. Here are a few common scenarios:

• Couples Entering Aged Care Together: In cases where both spouses enter aged care at the same time, the former home is treated as an assessable asset for both individuals.
• Aged Care for One Partner: If only one partner moves into aged care, the family home may still be exempt if the spouse continues living in it.
• Dependent Children or Grandchildren: Having dependents in the home may affect how it’s assessed for means-testing, potentially offering some level of exemption. 

Seeking Expert Guidance on Financial Implications 

The decision about the former home during an aged care transition is highly individual. To ensure that you or your loved ones make financially sound decisions, consulting with a financial advisor is essential. 

Summary of Key Considerations 

Understanding how retaining, selling, or renting the former home impacts financial outcomes can significantly aid in making informed choices during aged care transitions. Each choice carries unique financial implications, affecting means-tested fees and government support eligibility. 

For Personalised Assistance on Your Aged Care Transition 

Choosing the best path forward with your former home when entering aged care is complex, but you don’t have to navigate it alone. Contact Paris Financial today to discuss how we can help you with tailored advice on aged care, home assessment, and maximising benefits for a financially secure future.

You may also be interested in: Residential aged care changes – what could they mean for me?

Source: Challenger, www.challenger.com.au

Paris Financial Services Pty Ltd is a Corporate Authorised Representative (No. 357928) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. AFSL No. 223135

General Advice Disclaimer

The information in this article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives. Whilst every care has been taken in the preparation of this article, Paris Financial Services Pty Ltd, its directors, authors, consultants, editors and any persons involved in the construction of this article, expressly disclaim all and any form of liability to any person in respect of this article and any consequences arising from its use by any person in reliance upon the whole or any part of this article.