Aged care and your SMSF: 5 things you should consider

If the time has come to consider a move into residential aged care, you and your family are likely to be faced with significant financial decisions. If you have a self-managed super fund (SMSF), there can be an extra layer of complexity.

The good news is that planning ahead and financial advice can provide choices and help avoid some of the stress.

Here are five things worth considering.

1. How will you pay for your room?

Room prices vary but average just over $600,000 across Australia. And with choices on how to pay, it is important to understand your options and the implications of each one.

You will have a choice to pay a lump sum, known as a Refundable Accommodation Deposit (RAD), make ongoing Daily Accommodation Payments (DAPs), or use a combination of the two.

You should seek advice to run the numbers on cashflow and overall wealth position to decide which option might work best for you.

2. Could your super help fund the move?

Your SMSF may be one of your largest financial assets, so it shouldn’t be overlooked when considering how to fund aged care.

You might consider withdrawing money from super to help pay a RAD rather than selling other investments, especially as these withdrawals are tax-free after age 60.

But before withdrawing money, it is important to understand what you may be giving up. The lump sum is mostly refundable when you leave care, but if you have taken it out of your SMSF, you won’t be able to put it back in.

3. Don’t forget about tax after death

Your super may be tax-effective while you are alive, but tax may be payable when it passes to beneficiaries such as adult children. The potential tax consequences for your estate might influence whether retaining money in super or using it to fund aged care is the better strategy.

It is also a good time to review your binding death benefit nominations and broader estate planning arrangements.

4. Who will manage your SMSF if you can’t?

One of the most important questions is also one of the easiest to put off – what happens if you can no longer manage your own financial affairs?

If illness or declining capacity means you can no longer perform your role as SMSF trustee, it is critical to have an appropriate enduring power of attorney in place so that person can take over the legal responsibilities.

Think carefully about who you appoint. They may ultimately have considerable control over one of your largest assets.

5. Rethink the structure

For some people, this planning process may raise another question: is an SMSF still the right structure for the next stage of life? This thinking will be impacted by the reasons why you set up an SMSF and the benefits it offers you – and every person needs to consider this for their own situation.

Need help with aged care decisions?

These are not decisions you should make alone. We offer licensed and specialist aged care advice, to help you make the right choices. If you’d like to talk through your situation or understand your next steps, reach out to our team today to discuss your situation here.

Our team are ready to help you plan ahead and provide financial advice to help you make the right choices for you and avoid some of the stress. Contact us here.