My wife and I transferred the business operations to the kids at least five years ago, but we still hold the land and lease it to the kids for our retirement cash flow. I hear a lot about assets impacting families should there be a need for aged care, should we consider transferring the land now also?
How our assets impact our ability to find aged care services is becoming a topic discussed amongst families more and more.
Transferring farm land to another generation has a range of considerations such as capital gains tax, stamp duty, cashflow needs, financial security and aged care considerations can also be in the mix.
Understanding how the following aged care cost assessments work upon entering care is useful to assist in your analysis:
* Refundable Accommodation Deposit (RAD) is individually set by each aged care provider and is based on your asset and income circumstances. The RAD generally reflects the average house cost in the area. If unable to pay the full RAD assessed, the unpaid balance incurs a daily charge at 5.96 per cent (this is referred to as a Daily Accommodation Payment (DAP)). It is important to note that the RAD is refundable if the accommodation is no longer required, whereas DAP payments are non-refundable.
* Means-Tested Care Fee is calculated using a formula taking into account your income, investments and other assets including the family home. There are annual and lifetime caps that apply to this fee. The current lifetime cap is $66,078.
* Basic Daily Care Fee is charged at maximum of the single Age Pension (less the Pension supplement and Clean Energy supplement) regardless of your asset or income position and is charged at $51.21 per day.
* Extra Service Fees can be charged by the aged care provider. Some providers choose to have a nil cost for this and believe all care is factored into the prior fees mentioned. If you make a decision to transfer the land it is important to note that the above cost assessments still apply for five years after the date of transfer, if you enter aged care after the five years has passed the land would not be included in the cost assessments.
As all of the above has an impact on cashflow it is important to understand what your actual access to cashflow is, from time to time this may also require a discussion with your bank depending on your individual circumstances to use debt (if available) as part of the transfer strategy. Certain circumstances may allow you to claim for financial hardship, which will assist with the cost of care; this is assessed on a case-by-case basis. A decision to transfer assets should not be driven by aged care considerations in isolation, cash flow may be a key driver but ultimately it is part of a broader family succession strategy and planning around this will provide you with options to consider as a family. Aged care can be a tough topic of conversation for some and quite often takes courage to do so, working with family and your advisors to take a wholistic approach is recommended. If you would like more information on this topic or have a question please email firstname.lastname@example.org
Any information in this article has been prepared without taking into account your personal circumstances. You should seek professional advice before acting on any material. While reasonable care is taken in the preparation of this information to the extent allowed by legislation, Findex (Aust) Pty Ltd ABN 84 006 466 351, accepts no liability whatsoever for reliance on it.