Adult children are paying up to hundreds of thousands of dollars to help fund their parents into aged care, a trend that is expected to accelerate, the Australian Financial Review reports.
Financial advisers report a rising incidence of individuals in their 50s and 60s paying tens of thousands of dollars a year to supplement ongoing aged care costs on behalf of their parents, or hundreds of thousands of dollars to help meet up-front accommodation costs.
Although in many cases the money will be returned through the parents’ estate, the extra burden is being incurred at a highly stressful period for the family – and at a time when the adult children themselves may face lower pension payments and reduced returns on their investments.
“The financial implications of aged care come as a huge shock. Forward planning in aged care is such a rare thing,” said Drew Potts, a senior adviser at Western Pacific Financial Group in Adelaide.
“It is fraught with danger. A lot of time people don’t see the need for a formal document, but you need a good loan agreement. It is critical you get legal advice,” said Rachel Lane, founder of Aged Care Guru.
“I have seen some horror stories when children try to get the money back through the will,” Ms Lane said.
The rise in aged care costs is blamed partly on higher property prices and construction costs, which are pushing up the cost of accommodation. In Melbourne and Sydney, residents could have to fork out between $1 million and $2 million to cover the room charge upfront. Since a package of reforms was introduced in 2013, all aged care facilities have had the ability to charge for accommodation either upfront or through instalments.
Aged care cost time bomb hits boomers (Australian Financial Review)