Aged Care and the family home
The most common question we are asked with respect to aged care is ‘do we sell the family home in order to make the move’?
Sometimes this comes from the children of the aged care recipient and sometimes from the new or prospective resident themselves.
In line with many questions in this regard, we generally respond with…’well it depends’…
In many cases the answer is clear-cut and in many more it is not. So instead of filling this article with a series of financial calculations and related jargon to prove a point, I thought it would be helpful to raise the logistical questions one must ask when faced with this puzzle.
One of the biggest shortcomings of some of the financial modelling I have seen is that there is no allowance for the timing of a sale (or leasing) of a property. Anyone who has had experience in this field will soon tell you to allow several months from decision date to settlement date. This alone can have a significant impact on the care provided, the location of that care and the timing of the move into a facility.
Selling the family home is often a highly emotional decision and while it may be sound from a financial perspective, it may not be when family priorities and other matters are taken into account.
If the home is to be sold, you need to think about:
• Preparing the home for sale, including renovations, repairs and maintenance. This can be expensive and time consuming once third parties like builders and tradespeople are involved.
• Engaging an agent and deciding between auction and a private treaty sale.
• Appropriately pricing the property in a changing marketplace.
• Transaction costs on sale.
• The demand for property of this size and specification in your area?
• Adjustment to the Will if necessary. It is not uncommon for one child to be left the family home in the Will and the other children the remaining assets of the testator. This potentially comes undone if the Will is not adjusted after the sale.
If the home is not going to be sold, you need to consider:
• Preparing the property for rent. This may involve renovations and maintenance as well as sale of furniture and other items if no longer wanted or needed.
• Dealing with agents and / or tenants on a regular basis. For example, what provisions could you put in place to deal with a delinquent tenant?
• Appointing responsible people for the management and maintenance of the property.
• The impact on cash flow if the property is left vacant for a considerable time.
• Cash provisions for regular on-going costs such as insurance, land tax, rates and water.
• Maintaining a capital fund for when larger items needs repair or replacement.
Both of these key decisions may well have Centrelink implications, particularly over the longer term if you are in receipt of a government benefit.
In our experience making the ‘best’ financial decision does not necessarily align with the most appropriate decision for the case at hand; especially when dealing with several interested parties and determining the quality of care that can be provided.
Lex Goldsmith | Senior Planning Analyst | Principal Edge Financial Services
First published August 2015 | Landsdowne News, the publication for Landsowne Garden
