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The other side of rising life expectancy

Glenn Freeman  |  14 Dec 2018Text size  Decrease  Increase  |  
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No one plans to suffer dementia, but organising your financial affairs and estate planning is an increasingly important consideration that can reduce stress later.

Dementia is now the leading cause of death in Australia. Our ageing population means that as people are living longer, they have a longer retirement. This also means more people are living in a state of frailty for longer. And one in two people going into aged care have a mental incapacity.

But there are concrete steps people can take to make this time easier to cope with.

It’s a cruel irony that dementia is among several health issues that often materialise during the Christmas season. As families gather and pause for a break, now is often the time people begin to notice the onset of frailty and associated health concerns in their parents or other loved ones.

For other sufferers, who have no children, family, or who are perhaps estranged from their family, Christmas can be an even grimmer time, not to mention a financial burden: the average cost of aged care accommodation alone is about $400,000.

This is a common problem, according to Louise Biti, director of Sydney legal and financial consultant, Aged Care Steps. She says family estrangement often occurs because of a widespread misunderstanding of dementia.

"Many people think of it as just loss of memory, forgetting who people are, what they look like,” Biti says.

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"But what it will also do is change behaviours. People can become aggressive in actions and words [because there is] a lot of frustration, and they lose the ability to problem solve, to sort through things rationally.”

Australians are increasingly likely to reach the frailty years

aged care


Thinking ahead: Power of Attorney

Because of these complications, and the lack of a pre-defined plan, decisions are often made "by family members, in hospital car parks," she says.

A first step in planning, and one which will reduce stress, says Biti, is to establish an enduring power of attorney and legal guardian. In other, deciding who will be authorised to make financial and other decisions on your behalf when you are no longer capable.

"If there's a plan in place, it takes a bit of the stress out of the decision. Set a plan in place about who will do what and when; what's going to be important in making the necessarily decisions; and involve the family in that planning process," Biti says.

Considering care

Contingency planning is increasingly important, as three in 10 people over the age of 85, and almost one in 10 of those aged 65-plus, will suffer dementia.

Around 436,000 Australians are living with dementia in 2018. Without a medical breakthrough, this number is expected to increase to 589,000 by 2028 and surpass 1 million by 2058, according to Dementia Australia.

Things you and family members should consider include:

  • Can you be cared for at home, or do you need 24-hour care
  • What type of facility would you prefer and whether it’s suitable e.g. Residential care, group home, retirement village
  • What can you afford
  • Whether you qualify for government support, and if so, how much

'It's not lost money'

The Australian government subsidises residential aged care services, which are provided on the basis of two fee types:

  • daily care fees
  • accommodation fees. 

Daily care fees include a basic fee and a means tested fee, and both are set by the Australian government. As the name suggests, the means-tested fee – which has cost of care as well as annual and lifetime caps – is based on an individual’s means and income.

Uniting Care is one provider of aged care homes catering to a broad range of people, including those suffering mental incapacity. Its least expensive accommodation option starts at $160,000, paid as a lump sum – which currently equals a daily amount of $26.13.

The most expensive is an $850,000 lump sum, equalling a daily amount of $138.80.
The variance in these costs is based on different locations, quality and range of amenities, and size and type of building. They vary in the same way as general household rent and housing prices.

Uniting’s Lee Webster says residents have 28 days from the date of entry in which to elect their preferred payment method.

"If they elect lump sum, as an option, they have six months in which to pay, and in the interim period, will pay the daily amount,” Webster says.

"If the accommodation is paid as a lump sum, it acts like an interest free loan, so the balance is returned at the time of leaving the aged care home.”

Webster also notes that all Uniting's aged care homes have many residents who are government-supported, which means the government covers accommodation contributions – either in part or fully.

"Those residents receive exactly the same care and consideration levels as anyone coming to live with us, irrespective of their ability to pay.”

Aged Care Steps' Louise Biti also emphasises that even if paying a lump sum, it isn't simply "lost money" – something many people overlook initially.

For example, she says the average cost for aged care accommodation is about $400,000. "And when you leave, or pass away, that $400,000 comes back to your estate. It's not like retirement villages where it's paid, and you only get back some portion of it," Biti says.

She also emphasises the importance of professional advice, preferably from an accredited financial planner with expertise in aged care.

"Because the aged care facilities aren’t there to give you advice, they're there to get residents in the door. They don't know how the strategies work, or have their own ideas on how to encourage people into various options.

"The only person who's going to be objective is the financial planner you pay for the advice."


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is senior editor for Morningstar Australia

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