Aged care reforms could see clients disadvantaged
Financial advisers will need to untangle the complexities of the new aged care reforms so that their clients do not miss out on income, a fund management firm believes.
The reforms, due to hit July next year, come with a raft of new requirements and terminology changes, which if not managed properly, could see clients disadvantaged, Anna Lawton, senior manager, aged care services at Equity Trustees Limited (EQT), said.
"The reforms shift the system from an income tested fee to a broader means tested fee," Lawton said.
One of the key changes is the replacement of accommodation bonds with refundable accommodation deposits (RADS), which unlike their predecessor will be capped.
"The biggest change from a resident's cost point of view is that RADs will count as an asset while only the first $153,905 of a Principal Residence will be taken into account and included as an asset," Lawton said.
The aged care manager said that as a result, residents should be encouraged to pay off their RADS upfront and in full.
"There are a number of strategies that need to be considered, depending on the level of assets and income a person has. Professional advice will be required, to ensure the approach taken best maximises cash flow and capital preservation," Lawton said.
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