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The benefits of finding a financial advisor for the elderly

Finances are a topic I find difficult because I don’t have a financial mind. I get anxious just thinking about finances, especially my own.

I have super, but I have no idea where it is, or what it’s doing.

I have a credit card which I can’t bear to look at too closely because I will see nothing but ‘discretionary spending’ – whatever that means.

According to my accountant it means things you don’t absolutely, need to purchase.

According to my accountant food is discretionary, even if I shop at Aldi, but particularly if I go to the cafe and buy a pizza.

I just don’t get it. Numbers, percentages, formulas, financial rules and regulations are all a foreign language. I tell myself I get it when the accountant patiently and slowly explains the way finance works, but the moment I leave the room it is as if Tommy Lee Jones and Will Smith from Men In Black have used their Neurolyzer on me; my brief comprehension is obliterated and I find myself looking for a bar.

No matter how often I have tried to improve my financial literacy – over quite a number of years, I might add – I am still illiterate. The good news is that I’m not alone. (Or maybe that’s the bad news.)

Most of us are as qualified to manage our finances as we are to remove our own spleens and that applies to the people we care for too.

My parents have managed their finances their entire lives and we have only ever had to sell the family home once, to pay for food, and that was due to a crook ripping my father off, but that’s another story. However, no matter how well or not you have managed to get by, finances in later life can be very complicated.

Every decision you make about aged care has a financial component; from pensions to home care packages, from Carers Payments and Carers Supplements and Carers Allowances, to retirement villages and residential aged care.

To help your loved ones make any decision about any of these things and to be eligible for any government support at all, the first thing you need to know is where they sit financially, and a good financial advisor will help you do exactly that. What are their income and assets now? How can you make an informed guesstimate about their future costs and cash flow? Are they entitled to any government assistance? And if so, are they getting it?

MyAgedCare and Centrelink will both demand they do a Means Test, and suffice it to say a Means Test is mean. It can be difficult and complicated, it can feel punitive and unfair, and what is counted as means in a Means Test can change from government to government and month to month. The way the government assesses assessable and non-assessable assets and income, is – to use a financial expression – nuts.

No-one designed aged care support and funding from the ground up, so the rules are as overwrought and incomprehensible as a Homer Simpson designed car. New rules are created and bolted on to try to cover every new government policy and all the situations that could possibly occur.

Trying to decipher these rules is not an algorithm, it is second-guessing at best – and a professional financial advisor told me that!

The good news is, there are people who love this stuff, who are very good at it and are here to help.

My top tip of all time, when it comes to helping your parents with their finances, and, importantly, making sure their future care costs are met, is to pay a financial advisor who devotes their professional lives to keeping up with the changes in fees, entitlements and choices in the aged care sector.

A good financial advisor will:

Keep your elder’s assets safe and accessible

For example, an important part of planning is integrating aged care costs and making sure that, if there are investments, they are appropriate for the stage of life people are at. It may not be appropriate to have savings in the stock market in your nineties. You may want something less risky and volatile. A financial advisor will be able tio advise accordingly.

Ensure their assets are used to benefit their ongoing care and comfort

In other words, a financial advisor will be able to keep their assets out of the hands of unscrupulous people. This might include a discussion about the perils of plastic money. The difference between debit and credit cards, all of which look alike. The possible issues with PayWave. Someone once told me police were going to residential aged care homes to advise people to be careful of their plastic cards because grandkids were ‘borrowing’ them.

My kids have my card on their phone for emergencies. They seem to have lot of emergencies.

Help them protect their home

Many elders panic about having to sell their homes to help finance aged care. There are rules and regulations around when your home is considered as an asset and when it isn’t. A good later life financial advisor will be able to explain the financial impact of an elder going into aged care but keeping the family home or renting it out or not renting it out and keeping it empty. Or giving it away or passing it on. All these decisions have numbers that can be crunched.

Ensure government assistance is maximised

Our elders might not have been eligible for a pension when they retired but changes in their circumstances might mean they are now eligible for a part pension. This is another topic a financial advisor will be able to help with For example, if they use some of their assets as RAD (see next bit) they have fewer assets and might then be eligible for a Part Pension. If they receive just $1 of the pension this will enable them to access around fifty subsidies, supplements, concessions, and programs. A financial advisor will be able to offer expert advise on government assistance.

Work out the costs of Residential Aged Care

When a person goes into care, the government’s key question is how much that person can contribute to the cost. The amount they contribute is called a Means Tested Fee. I have been told that working out this fee is more complex than the Age Pension Means Test, or possibly quantum physics, and a financial advisor will be able to help with this.

For example, the means-tested care fee must not only consider any government subsidies and supplements for which your loved one may be eligible, but also their financial assets, including superannuation, business income, rental income and any ‘deemed’ income. Deemed income is income the government assumes you are receiving from banks or other financial investments – not the income you are actually receiving, which, in the majority of cases is a lot less.

And then on top of this Means Tested Fee, there is also the Basic Daily Fee and Accommodation Costs. Costs and fees are different, and as I have said this calculation is wilfully indecipherable. The process is like solving a Rubik’s Cube in a darkened room when you are colour blind.

Depending on the outcome of this calculation, your elders pay nothing, or a ‘contribution’, or the full amount.

This is called an Accommodation Payment and you will need to agree on the amount directly with the aged care home before they move in.

You can also negotiate how you might like to pay, either through

– a lump sum ‘Refundable Accommodation Deposit’ (RAD).

– rental-style payments called a ‘Daily Accommodation Payment.’ (DAP)

– Or a combination of both.

– Remember if you pay the RAD for your elder, when they die the money will go into their estate. Therefore, you need to have a Loan Agreement drafted because if you have a dodgy sibling, your money may well go to them and there will be nothing you can do about it.

There are also fees for Additional Services, or upgraded services; better linen, better food, a glass of wine.

If your loved one has little or no means and you are wondering if they can afford a simple bed and room, then there is good news. You can get a ‘Supported Bed’ where the government will subsidize your costs. Naturally they are limited and not available everywhere.

You can also apply for Financial Hardship Assistance if you are struggling to find the money for aged care costs. Once again you must fill in a lot of forms.

The other thing a good financial advisor will always do is:

Keep your parents at the centre of the discussion

This ensures that your loved ones have an understanding of what happens when things change and have control over all their financial decisions.

Frankly, the whole system feels like it is designed to confound you.

I have scoured so many government websites and burst small veins around my forehead trying to translate bureaucratic blather that I sometimes wonder who is actually in charge.

You can see why my top tip of all time is to get a professional to help you make the best decision.

It’s certainly worth spending the $400 on a professional to give you a snapshot of your elder’s financial position.

Finally, in order for you to help your parents effectively your parents will need to have all their legal documents in place; Power of Attorney, Enduring Power of Attorney, Enduring Guardianship, a Will and an Advance Care Directive. That’s my next column – how to avoid a nightmare.