What Assets Are Exempt from Care Home Fees?

How Are Care Home Fees Assessed?

In Australia, care home fees (Aged Care Fees) are means-tested, meaning that a person’s income and assets are evaluated to determine the cost of their care. This assessment considers most assets, including savings, real estate, and personal investments. However, certain assets are exempt from this means test, allowing families to retain wealth under specific conditions.

According to the Australian Government’s My Aged Care service, the means test does not consider every asset, which allows for strategic financial planning to minimise care fees where possible.

Read More: Means-Tested Care Fee Explained

1. Primary Residence

The family home is one of the most significant assets, and in many cases, it’s exempt from means testing, but there are conditions:

• If a spouse, partner, or dependent relative resides in the home, it will likely remain exempt. This exemption can also apply if a carer who has been living there for at least two years continues to reside on the property.
• The exemption status changes if the property is vacant or sold, so careful planning is crucial. Temporary stays in a care facility also generally do not impact the exemption status of your home.

By retaining ownership of a primary residence, many families can preserve a major asset while managing care home (Aged Care) costs.

2. Exempt Savings and Investments

While the means test considers most savings and investments, there are specific cases where exemptions apply:

• Tax-advantaged accounts like certain superannuation accounts may receive favourable treatment, especially if held by a spouse.
• Jointly held accounts might also be subject to partial exemptions. The treatment of these accounts can vary depending on individual circumstances, so consulting a financial expert is advisable.

Retirees are often unaware of exemptions within superannuation that could impact their care fees, underscoring the importance of understanding asset classifications.

3. Pensions and Annuities

Income from pensions and annuities plays a role in the means test, but some pensions come with exemptions or are only partially assessed:

• Veterans’ pensions, for example, often receive favourable treatment, with certain payments exempt from means testing.
• Additionally, annuities that are structured with specific estate-planning considerations can help limit assessable income.

Understanding these nuances can help families manage both income and assets efficiently, reducing care-related expenses.

4. Personal Possessions

Personal items, such as jewellery, vehicles, and family heirlooms, are generally exempt from care home (Aged Care) assessments unless they hold substantial investment value:

• Most belongings will not be part of the means test unless they’re seen as assets for potential sale or investment.
• However, collectors’ items (like art or rare antiques) may be evaluated individually if their resale value is significant.

By carefully managing possessions, families can ensure that sentimental and valuable items stay within the family, unaffected by care fees.

5. Trusts and Gifts

Setting up trusts can be a viable strategy for protecting assets from care home (Aged Care) costs. However, not all trusts qualify for exemptions:

• Irrevocable trusts, where assets are transferred permanently, are often structured to avoid inclusion in means testing. These require careful planning, especially regarding “look-back” periods that might impact exemption status.
• Gifting assets also comes with limitations. Gifts made within a certain timeframe before entering care can be scrutinised and possibly included in means testing.

Creating trusts and gifting requires foresight and legal advice, as incorrectly structured plans can lead to unexpected care costs.

6. Insurance Policies and Funeral Plans

Certain types of insurance and pre-paid funeral plans can also serve as exemptions:

• Life insurance is usually exempt, particularly if policies are payable to beneficiaries rather than the estate.
• Funeral plans that are pre-paid are also typically excluded from the means test, allowing families to plan in advance while reducing future care liabilities.

Planning with these policies offers a way to keep funds aside for specific needs without impacting financial assessments.

7. Business Assets

For those who own businesses, certain business assets may be exempt from means testing if they meet specific criteria:

• Family-run businesses can often retain exempt status if they’re actively operated by a spouse or family member.
• Farm and rural properties, especially those in active use, are sometimes exempt to allow families to continue their livelihood.

Careful structuring of business assets can provide stability and asset protection, which is essential for families that rely on these assets for income.

Common Pitfalls to Avoid

While planning for aged care costs, some common mistakes can lead to unintended consequences, including:

• Last-minute transfers: Moving assets right before care assessment can often be challenged, leading to penalties or assessments.
• Improper trust structures: Trusts that aren’t set up correctly may not be exempt, leaving families with higher care costs.
• Inadequate legal advice: Relying solely on informal advice can be costly; professional financial planning is essential for maximising exemptions.

Avoiding these pitfalls ensures that your assets are well protected and your financial plan remains intact.

Steps for Financial Planning and Protection

Navigating asset exemptions requires careful financial planning. Steps you can take include:

• Consulting with a financial planner or estate lawyer to evaluate which assets are best protected.
• Structuring trusts, insurance, and estate plans with care to avoid unexpected fees.
• Reviewing superannuation and pension assets to maximise their potential exemptions.

Starting early and consulting professionals can provide peace of mind while securing a greater share of your wealth.

Also Read: What Are Home Care Packages

Conclusion

Understanding which assets are exempt from care home (Aged Care) fees allows you to preserve wealth while ensuring you’re prepared for the future. By strategically managing assets and consulting with professionals, families can effectively protect their estates while reducing care-related costs.

If you’d like to discuss your specific situation, reach out to us for tailored guidance. At Roccaforte financial planner and aged care specialist in Sydney, we specialise in financial planning and wealth preservation strategies that protect your legacy. Contact us to book a free consultation and learn how our personalised approach can help you plan for tomorrow, today.