Ruth's Funeral Bond

Ruth has recently been assessed as needing residential aged care. As her daughter has been living in the home as her carer for more than five years they house will be an exempt asset for aged care purposes. Ruth’s asset and income assessment results in her qualifying as a low means resident.

Assets
House $500,000 Exempt
Cash $130,000
Contents $5,000
Total $635,000
Income
Pension Entitlement $23,254 p.a. per fortnight
Investments at 2% $2,600 p.a. on $130,000
Total $25,854
Ongoing Costs
Basic daily fee $18,038 p.a. $49.42 per day
Daily accommodation contribution $15,355 p.a. $42.07 per day
Living expenses $3,650 p.a. $10.00 per day
Total $33,394
Ruth's cash flow ($7,539)

Note that if Ruth paid a refundable accommodation contribution the maximum she can pay in the first 28 days is $87,500, because she must be left with $47,500. If she does this she can have the adjusted daily charge deducted from the RAC she has paid. Alternatively, she could fund her cash flow deficit from savings (Lane & Whittaker, 2016).

If Ruth invests $12,500 in a funeral bond and gifts $10,000 to her daughter, she will reduce her assets from $135,000 to $112,500.
Now her assessable assets would be only $65,000. Her DAC would be recalculated as $31.25 per day or a RAC of $200,109, saving $3,949 per year in the first year that Ruth pays by DAC.

Lane, R., & Whittaker, N. (2016). Aged Care Who Cares? In R. L. Whittaker, Aged Care Who Cares? (p. 185). Noel Whittaker Holdings Pty. Ltd.

Steve Jenkosky trading as Golden Age Advisory is an Authorised Representative of Synchron AFS License No. 243313.
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