June Gives Money to Her Son

June has recently been assessed as requiring residential aged care. Her son has lived with her for the past seven years to support his mother and is receiving a carer’s pension, so the home is exempted from her assessable assets.

Assets
House $500,000 exempt
Cash $100,000
Personal Effects $2,000
Total $602,000
Income
Pension entitlement $23,254 p.a. $894.40 per fortnight
Investments at 2% $2,000 p.a. on $100,000
Total $25,254
Ongoing costs
Basic daily fee $18,038 p.a. $49.42 per day
Daily accommodation contribution $9,563 p.a. $26.20 per day
Living expenses $3,650 p.a. $10.00 per day
Total $31,251
June's cash flow ($5,997)

Although June is eligible to be a low means resident, she is unable to meet her cost of care from her age pension and investments. Note that if June paid a refundable accommodation contribution instead of a daily accommodation contribution her RAC would be $167,772 (Lane & Whittaker, 2016).

Let’s look at the impact on June’s cost of care, if before she enters the aged care facility, she gifts $10,000 to her son on the 30th June and a further $10,000 on the 1st July.

Assets
House $500,000 exempt
Cash $80,000
Personal effects $2,000
Total $582,000
Income
Pension entitlement $23,254 p.a. $894.40 per fortnight
Investments at 2% $1,600 p.a. on $80,000
Total $24,854
Ongoing costs
Basic daily fee $18,038 p.a. $49.42 per day
Daily accommodation contribution $6,055 p.a. $16.59 per day
Living expenses $3,650 p.a. $10.00 per day
Total $27,743
June's cash flow ($2,889)

As we can see, June has reduced her assets from $102,000 to $82,000. Her DAC would be recalculated as $16.59 per day or a RAC of $106,234, saving $3,508 per year in the first year that June pays by DAC. June still has a cash flow deficit but it has been greatly reduced (Lane & Whittaker, 2016).

Lane, R., & Whittaker, N. (2016). Aged Care Who Cares? In R. L. Whittaker, Aged Care Who Cares? (pp. 181 - 182). 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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