By James Kelly, Elders Law specialist from Owen Hodge Lawyers

Australia’s ageing population is increasingly exploring retirement and aged care accommodation options. However many individuals on the cusp of such a transition are unaware of the hidden costs and potential financial quagmire associated with such a move, in the absence of appropriately structured legal and financial affairs.

Within this context our experience has been that many people make mistakes which have cost them thousands. Potentially this figure could easily run into the millions across the country. Unfortunately they did not fully understand the lengthy documentation and costs associated with entry into retirement and aged care facilities. This is an extremely complex area and by not seeking specialist advice people are potentially doing themselves an injustice.

People are using google as their first port of call for advice. However, specialised guidance regarding retirement and aged care accommodation options, the fine print implications of associated costs and appropriate asset structures for those individuals considering this move, are certainly not adequately addressed on google.

The number of retirement accommodation options represents a potential mine field for people entering this phase of their lives. Properly structuring the ownership of assets could save retirees thousands of dollars. The problem is they are bombarded with an enormous amount of information and the vast majority find this overwhelming.

This situation is further compounded in the case of accidents that force elderly people into specialised accommodation much sooner than expected. Relatives often don’t have the time or expertise to fully explore the financial implications of the various accommodation alternatives and hence choose the easiest and quickest option. It is critical that the various options and their implications are assessed before accidents happen, thereby ensuring the best option is chosen to accommodate the needs and financial circumstances of the person concerned.

In most cases residents are required to pay bonds to stay in aged care accommodation. During the past 10 years these fees have increased substantially. In 2000 bonds averaged between $200,000 and $500,000. Today these range between $300,000 and up to $1 million for the same aged care accommodation.

Depending on the accommodation choice, proper asset plans can play a major role in determining whether people can keep their full pension or other government benefits. A poorly constructed plan, or indeed no plan, could cost an individual’s full entitlements in addition to considerably more cash. A red flag indicator that asset planning is urgently needed is when an Aged Care Assessment Team is required.

An example of this situation is a 59 year old woman who was faced with the daunting task of arranging the finances for herself and her husband after his Alzheimer’s disease dictated specialised residential care. Her husband’s condition had deteriorated quite rapidly and everything was left to her to organise, not only accommodation but all financial matters. She had no idea what she was doing and signed up to the first option that was presented to her instead of seeking advice and exploring all options.

The woman’s haste in making her decisions ended up costing her thousands of dollars. She found the implications of the various available choices were not fully explained to her and she had to work them out as best she could. She indicated that given her time over again she would have taken more time and used a qualified solicitor to sort through the complexity of her situation.

Four important recommendations before deciding on retirement accommodation include:

1) Seek specialised legal and financial advice prior to making any decision and signing any documents.

2) Ensure estate planning is in order. Is there a Will and has a power of attorney or enduring guardian been appointed

3) Be prepared for a change in circumstances.

4) Discuss with elderly family members their different options while they are still cognizant of their surroundings.