Aged Care and Estate Planning: The Conversations the 2026 Budget Made More Urgent
- Andre Dirckze
- 4 days ago
- 14 min read
By Andre Dirckze, Principal Adviser, Wealth Effect Group
Article 7, the final article in our detailed Federal Budget 2026–27 series. For the overview briefing, see [link to hero article].
In the conversations we have had with clients since the Budget, two topics have come up far more often than the headlines would predict.
The first is whether the family trust still works. We covered that in detail in article 3.
The second is aged care — both as a future cost for the client themselves, and as a current cost for ageing parents that adult children in their 40s and 50s are quietly absorbing. This second conversation is more emotional, more complex, and more under-planned than almost any other topic we discuss with clients. It is also the conversation that, in our experience, produces the most relief once it is finally on the table.
This article does two things:
1. Walks through the aged care funding landscape after the Budget, including the new Support at Home program changes from 1 July 2026
2. Provides a framework for what we call the "sandwich generation" — clients aged 45 to 60 simultaneously supporting ageing parents and building their own retirement — to think about the integrated planning question
This is the final article in the Budget series. It is also, in many ways, the most important — because for the cohort we advise, aged care funding is rarely if ever planned for properly, and the cost of getting it wrong falls on multiple generations.
As always — before reading on, please understand that the topics in this article involve highly complex interactions between aged care policy, tax law, social security rules, estate planning, family dynamics and personal circumstances. Nothing in this article should be acted upon without proper integrated advice.
The headline numbers from the Budget aged care package:
• $3.7 billion of additional aged care investment
• 5,000 additional residential aged care places
• Capped pricing under the Support at Home program from 1 July 2026 (the new in-home care program replacing the existing Home Care Packages program and Commonwealth Home Support Programme)
• $565 million for residential aged care quality
The Support at Home reforms are the most operationally significant change. The program introduces a new pricing framework for in-home care services, with capped costs for service providers and clearer fee structures for participants. For families currently navigating the Home Care Packages waiting list — which has long been a source of frustration — the new program promises improved access and clearer pricing.
The residential aged care funding increase addresses a long-acknowledged shortfall in the sector. Whether 5,000 additional places will materially close the gap in availability depends on a range of operational factors, but the direction is positive.
In broader terms, the Budget continues the long-running trend of increasing investment in aged care while gradually shifting more of the funding burden toward private contribution from those with the means to pay. This is the direction successive governments have travelled in for two decades. The reforms in this Budget confirm the trajectory rather than change it.
For families planning the funding of aged care — for themselves or for parents — the practical implication is unchanged in direction but reinforced in degree: expect aged care to cost more, expect the user-pays component to grow, and plan accordingly.
For readers not currently familiar with the system, a brief summary of how aged care is funded in Australia today. The system is complex; this is a high-level orientation, not a complete explanation.
Funding for residential aged care comes from three sources:
1. Government subsidies. The Commonwealth pays the bulk of the operational cost via subsidies to approved providers. The subsidy amount varies based on the resident's assessed care needs.
2. Means-tested resident contributions. Residents pay an income-tested fee and (where applicable) an assets-tested daily fee. Both are subject to caps. The fees increase with income and assets, and the calculation involves complex interactions with social security thresholds.
3. Accommodation contribution. Residents pay for their accommodation through either a Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP), or a combination. RADs can be very substantial — $500,000 to $1,500,000+ for higher-end facilities — and are refunded to the resident's estate on departure or death (subject to certain reductions).
The combination of means-tested fees and accommodation contributions can mean residents with substantial assets and income pay a meaningful proportion of their care costs directly.
Funding for in-home care comes from:
1. Government-subsidised packages under the existing Home Care Packages program (transitioning to the new Support at Home program from 1 July 2026)
2. Means-tested participant contributions
3. Out-of-pocket private services where the subsidised package is insufficient or where the client chooses to top up
For many families, the practical reality is that the government-funded package covers some, but not all, of the services the older relative needs. The shortfall is met privately — and that shortfall is often absorbed by adult children supporting their parents.
The interaction between aged care fees, social security entitlements (Age Pension), the family home's status (exempt from the asset test in some circumstances, partially counted in others), capital gains on the eventual sale of the family home, the structure of the surviving spouse's estate, and the inheritance impact on adult children — all of these compound into one of the most complex planning problems we encounter.
There is no simple checklist. There is only careful integrated modelling, family conversations, and decisions made with the right professional advice.
The term "sandwich generation" refers to adults — typically in their 40s and 50s — simultaneously supporting ageing parents and building their own retirement (and frequently still supporting adult children through education, housing entry, or early career).
For many of our clients, this is the current lived reality. A typical situation looks something like:
• One or both parents in their 80s, transitioning from independent living to either in-home care or residential care
• A waiting list for the parents' preferred care setting, with substantial private cost in the interim
• The adult child (the client) absorbing some combination of: paying for top-up private services, paying out-of-pocket for the gap before the package becomes available, managing the parents' financial affairs (often as power of attorney), navigating the My Aged Care assessment process, and making decisions about whether to sell the parents' home to fund accommodation
• Simultaneously: building their own super balance toward retirement, managing children's tertiary education costs, paying down their own mortgage, sustaining their career and household finances
• And, increasingly, watching the Budget reforms reshape the rules around their own retirement planning
This is genuinely hard. It is hard financially, hard logistically, and hard emotionally. It is also rarely planned for in advance — and the financial impact often only becomes visible when it is already happening.
For clients in this position, we use a framework that explicitly addresses both directions of the squeeze. The framework has four elements.
The first conversation is rarely the financial one. It is the family one: do you know what assets your parents have, where they are held, what their wishes are about care, and who has legal authority to act if they cannot?
For many adult children, the honest answer to one or more of these questions is "no" or "incompletely." That gap is the first thing to close.
Once the picture is on the table, the financial questions follow:
• What is the income position? Age Pension, super pensions, investment income, any small business income, family trust distributions.
• What is the asset position? Family home, investment assets, super balances, savings, personal effects.
• What is the structure? Joint ownership, individual ownership, trust ownership, super membership, beneficiary nominations, existing wills and powers of attorney.
• What is the projected care cost? This depends on the level of care needed (independent living, in-home, low-level residential, high-level residential, dementia care), the preferred setting, and the local market for that setting.
• What is the funding gap? The difference between projected care costs and the parents' existing income and asset base.
Most of the time, the parents' financial position is more substantial than the adult child realised, or less substantial. Either way, knowing rather than assuming changes the planning conversation entirely.
Even where the parents have sufficient long-term assets, the cash flow timing of aged care can be challenging. A residential care RAD of $850,000 may require either an immediate cash payment or an equivalent Daily Accommodation Payment. The cash to fund the RAD often comes from the eventual sale of the family home — but the sale may take months and the care may need to start immediately.
The bridging finance question — how the parents' care is funded between the start of care and the eventual liquidation of the underlying asset — is one of the most common planning problems we help with.
Options include:
• Sale of the family home in advance of care commencement
• Reverse mortgage or aged care loan facilities specifically designed for this transition
• Bridging finance from family — typically the adult children, with formal documentation
• Daily Accommodation Payment (DAP) instead of RAD, with the eventual home sale funding a future RAD conversion
• Combination approaches that draw on multiple sources
Each option has financial, tax and family implications. The right approach depends on the parents' broader estate plan, the family dynamics, and the practicality of each option in the specific circumstances.
Supporting parents is generally done by reducing one's own retirement savings, taking on additional debt, or some combination. For an adult child in their late 40s or 50s, both responses have meaningful long-term cost.
Reduced super contributions during this period compound to substantial gaps at retirement. A 50-year-old who diverts $20,000 a year of intended super contributions to parental support over a 5-year period gives up perhaps $200,000–$300,000 of after-tax retirement wealth at preservation age.
Additional debt taken on to support parents is similar in effect — the interest cost and the displacement of other wealth building.
The honest reality: many adult children make these sacrifices willingly and without regret, because the values driving the choice are clear. The financial conversation is not about discouraging the support — it is about ensuring the support is structured optimally and the long-term impact is understood.
Specific planning considerations:
• Formal versus informal support. Informal support (paying expenses, providing housing, transferring funds) usually has no tax or estate consequence at the time, but can have inheritance implications later. Formal loan documentation protects the family's broader interests, particularly where there are multiple adult children with potentially different contributions.
• Care of parents inside the adult child's own structure. In some cases, formalising the support arrangement through a family company, trust or formal employment relationship produces better outcomes than informal payments.
• Inheritance equalisation. Where one adult child carries more of the care load than siblings, the parents' estate plan can be drafted to recognise this through unequal distribution. This is a family conversation, but it should be a planned one, not an inferred one.
• The adult child's own super contributions. Even modest contributions during the support years preserve the long-term wealth position. Sacrificing super entirely usually produces worse outcomes than reducing the support modestly.
The reforms in this Budget have specific estate planning implications that warrant attention in this context:
Testamentary trusts existing at the announcement date are excluded from the new 30% trust minimum tax. For families with substantial estates and adult children who may face significant marginal tax rates on inherited income, the testamentary trust remains a powerful estate planning structure — and the timing of establishment matters.
Inheritances of property are affected by the new CGT regime depending on the timing of the bequest and the eventual realisation. Inherited assets that the beneficiary subsequently sells may face the new indexed CGT regime on growth accruing after 1 July 2027.
Super death benefits continue to be a critical estate planning consideration. The taxable and tax-free components of super affect the beneficiary's after-tax outcome significantly — particularly where the beneficiary is a non-dependant for super death benefit purposes (typically adult children not financially dependent on the deceased).
Power of attorney and enduring guardianship documents — both for the client and for the ageing parents — are the foundational documents that determine who can act, when, and on what authority. These are frequently outdated, missing or inconsistent across the family.
The estate planning piece is not optional, and it is not a one-time exercise. For sandwich-generation clients, the estate plans across both their own circumstances and their parents' circumstances need to be reviewed, aligned and kept current.
To illustrate the integrated nature of the planning, consider a composite of common situations we see:
The client: Lisa, 52, marketing executive on $230,000. Husband Mark, 54, IT consultant on $280,000. Two children: Sophie 19 (university), Tom 21 (working in his first job, still living at home). Combined super of $1.5m. Family home worth $2.2m with $300,000 mortgage. One investment property bought in 2014 worth $830,000, negatively geared.
Lisa's parents: Father 84, mother 81. Living in the family home in a regional area worth approximately $750,000. Modest super balances totalling around $260,000 between them. On the Age Pension. Father has early-stage dementia; mother managing day-to-day but increasingly exhausted. The family has been discussing residential aged care for the father but has not progressed beyond conversation.
Mark's parents: Both deceased; Mark's father five years ago, mother three years ago. Mark inherited approximately $400,000, which is in their joint investment portfolio.
Current pressures:
• Father's care needs are escalating; the recent month-on-month change is noticeable
• The waiting list at the preferred local residential care facility is 8–14 months
• Mother does not want to leave the family home, but cannot continue caring for father at current intensity
• Sophie's university costs running at $25,000 per year
• Lisa's super contribution strategy is below capacity; both Lisa and Mark have been prioritising mortgage paydown and supporting Sophie
• No one in the family has had a serious conversation about Mark's mother-in-law's eventual care needs once father is in residential care
• The investment property's negative gearing has been working but the strategy was always to add a second property in 2028 — Lisa is now questioning whether that still makes sense
• Neither Lisa nor Mark has reviewed their wills since the children were born
The integrated planning view:
The Federal Budget changes are real but, in Lisa and Mark's situation, are not the most urgent issue. The most urgent issues are:
3. Lisa's parents' aged care planning — needs to be addressed in the next 60 days, not next year. This involves the My Aged Care assessment process, the residential care application, the discussion about the family home, and the funding strategy
4. Powers of attorney and enduring guardianship for Lisa's parents — must be confirmed in place and current; without these, decision-making authority during incapacity becomes very difficult
5. The family conversation with Lisa's parents and her siblings about the care plan, inheritance expectations and the funding model — frequently the hardest piece but the most foundational
Once those are stabilised, the Budget-related planning for Lisa and Mark themselves moves to the front:
6. Maximising both Lisa's and Mark's concessional super contributions — they have capacity they are not using, and the reforms have made super more valuable in relative terms
7. The investment property strategy — existing property is grandfathered; the second-property question becomes a super-vs-new-build-vs-debt-reduction modelling exercise rather than a "buy another property" assumption
8. Wills and estate planning refresh — both Lisa and Mark need to update wills, super death benefit nominations, and document their preferences around aged care for themselves
9. Mark's potential inheritance from the deceased parents — is the inheritance held in a way that captures the testamentary trust exclusion from the new trust rules?
The planning becomes much clearer when the right elements are on the table in the right order. The mistake we see most often is clients trying to address one element at a time, with different professionals, in different conversations, and never getting to the integrated view.
The patterns are consistent and they are usually well-intentioned mistakes — which makes them harder to spot and harder to address.
Mistake 1: Avoiding the conversation with parents until forced.
The most common pattern. Adult children defer the conversation about parents' finances, care preferences and estate planning until a health event forces it. By that point, the parent may not have capacity, the documents may be outdated, and the family may face contested decisions with limited information.
Mistake 2: Treating parental support as cash flow, not capital.
Supporting parents financially is often treated as a budget line — an ongoing expense to be managed. But significant cumulative support over multiple years is a capital decision in everything but name, and warrants the same level of planning as any other capital allocation.
Mistake 3: Sacrificing own super contributions during the support years.
The compound cost of giving up 5–8 years of super contributions during the late 40s and early 50s is substantial — and frequently underestimated. Even reduced contributions are usually better than zero.
Mistake 4: Not formalising inheritance equalisation.
Where one adult child carries more of the care load, the parents may verbally express an intention to "balance things up" in the will. Without formal documentation, this rarely happens cleanly. The expectations need to be on paper.
Mistake 5: Underestimating residential aged care costs.
The headline figure is often the daily care fee. The actual cost — including accommodation contributions, means-tested fees and gap services — is frequently several multiples of the headline. Planning based on the headline produces inadequate funding.
Mistake 6: Ignoring the second parent.
When one parent moves to residential care, the focus is often on that parent. The surviving spouse — who may have years or decades of independent living ahead — has a separate planning need that is frequently deferred until they too face a transition.
Mistake 7: Out-of-date estate documents.
Wills drafted when children were young rarely reflect current family circumstances. Powers of attorney made decades ago may not reflect current relationships. Super death benefit nominations made at fund commencement may not reflect current intentions. The documents need to keep pace with the circumstances.
The Federal Budget Strategy Review for clients in the sandwich-generation position is an explicitly integrated engagement. It usually involves:
• A separate session on the parents' position — assets, income, structures, documents, care needs, family dynamics
• An aged care funding model — projecting the parents' funding profile over multiple scenarios
• A formal conversation about family roles — who is the power of attorney, who is the executor, who carries the practical care load, how is this recognised
• The client's own planning — full Budget integration as described in article 6
• Estate planning alignment — across both the parents' position (where appropriate and where the parents are agreeable) and the client's own
• A formal connection to specialist advisers — aged care placement consultants where appropriate, elder lawyers, accountants with aged care expertise
• An annual review cadence — circumstances in this domain change rapidly; the plan needs to keep pace
This is more work than a typical financial advice engagement. It is the work the situation justifies — and it is the work that, in our experience, produces the most relief for clients carrying the weight quietly.
We have spent the past two weeks publishing detailed analysis of the 2026–27 Federal Budget and its implications for clients aged 40+ building and managing wealth in Australia. Eight articles in total — overview, CGT, negative gearing, trusts, superannuation, business sale, the pre-retiree playbook, and now this final piece on aged care and the sandwich generation.
The themes that run through every article are the same:
• The reforms are significant and prospective
• They create a defined planning window
• The unprepared bear the brunt; the reactive make expensive mistakes; the properly advised find opportunity
• Integrated, deliberate advice — taken in time — produces dramatically better outcomes than fragmented or reactive approaches
For the cohort we advise — Australians who have spent two or three decades building wealth through property, business, family trusts, superannuation, and now face aged care planning alongside everything else — this Budget is a generational reset. The decisions made between now and 1 July 2028 will define after-tax outcomes for many of you for the rest of your lives.
We have built our practice around this cohort, around this kind of integrated work, and around the principle that clients are best served by advice that is honest, thorough and proactive. If anything in this series has prompted a question about your own position, we would welcome the conversation.
The window is open. It will not stay open forever.
1. The 2026–27 Federal Budget: A Generational Reset for Australian Wealth (the overview)
7. The Pre-Retiree's Playbook: Navigating Budget 2026 in Your 50s and 60s
8. Aged Care, Estate Planning and the Sandwich Generation (this article)
If you are managing your own position alongside ageing parents, or if any of the themes in this article have prompted a question about your own planning, we would welcome the conversation.
wealtheffectgroup.com.au — financial advice for pre-retirees, retirees, business owners and families
wesmsf.com.au — SMSF administration, compliance and services
weprivate.com.au — private wealth advice for clients with $5m+ investable assets
Andre Dirckze is the Principal Adviser of Wealth Effect Group, a national Australian financial advice business with offices in Melbourne and the Gold Coast.
This article contains general information only and does not take into account your personal objectives, financial situation or needs. It is not personal, financial, tax, legal, aged care or estate planning advice. Aged care funding, social security entitlements, estate planning, inheritance considerations and the interactions between them are highly complex and require specialist professional advice. The scenarios discussed are illustrative composites and do not represent any specific client. The information is based on the 2026–27 Federal Budget announcements and aged care policy as at publication; legislation has not yet been enacted for several of the broader Budget measures referenced. Before acting on any of the strategies referenced you should seek personal advice from a licensed financial adviser, registered tax agent, qualified legal practitioner and, where appropriate, specialist aged care advisers, who can consider your full circumstances. Wealth Effect Group Pty Ltd and its related entities accept no liability for any loss or damage arising from reliance on this article.
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