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The effect of downsizing your home on your aged care

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Many of us may know from bitter experience what an impenetrable regulatory jungle the aged care system can be. There are wild carnivorous animals lurking in the undergrowth waiting to pounce on, and devour, any unsuspecting family.

Before detailing the recent experience of one such family, it would be best to explain one of the rules of the jungle that apply to the assessment of how much you pay for aged care. It all relates to how the regulators treat the ‘family home’ when applying the aged care assets test.

Part of the value of the family home can be an assessable asset for the purposes of the aged care assets test. There are exceptions. One of those is where a close relative, who is eligible to receive a government income support payment, has been living in the home for at least 5 years before a person moves into aged care. In such a case, the family home remains an exempt asset.

Here’s what happened to the Vincent family:

  • Mr Vincent was a 95 year-old war veteran and married to Mrs Vincent;
  • Their daughter, who was receiving a disability pension, had lived with them for many years;
  • Mr Vincent’s daughter was his attorney under an Enduring Power of Attorney;
  • At the time Mr Vincent moved into residential aged care, the parents’ home was an exempt asset due to his spouse, Mrs Vincent continuing to live there;
  • However, perhaps understandably, the daughter and her mother then decided to downsize. They sold the family home and purchased a unit in the names of Mr and Mrs Vincent and the daughter, as joint tenants;
  • But, before moving into the unit, the mother fell ill and had to move into residential aged care. The daughter moved into the unit by herself and dutifully told the Department of Veteran Affairs (“DVA”) about the new circumstances of her parents.

DVA determined that the new unit was not exempt and was an assessable asset for aged care and the DVA pension. The daughter sought a review of the decision.

She failed because as she had not lived in the unit for the preceding five years before her mother went into aged care, the unit no longer satisfied that condition to make it an exempt asset.

The Tribunal confirmed that the unit was not an exempt asset. The parents’ previous home was, but that was history.

Oh dear – could it be that the family did not obtain any advice before they engaged in the downsizing? If so, here is another hard lesson for the DIY brigade who may think that aged care is straight forward or can be understood from a bit of browsing on the web. It’s not.

While it may make a lot of sense to downsize your home, as the Vincent family discovered, it can also come with hairs on it. With a bit of good advice, beforehand, not afterwards, they may have decided that a good idea was really a bad idea.

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