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  • Writer's pictureAndre Dirckze

To Keep or Not to Keep the Family Home and Residential Aged Care?

The family home need special consideration when it comes to aged care planning    Many people who face the prospect of moving into  aged care facility must also make a decision about what to do with the family home they are leaving.

At WE. we have a different opinion about how the family home should be treated than many financial advisers. Essentially, we regard family homes as the foundation of most people's wealth. As a result, our starting point is that the family home should be kept whenever possible.

Having said that, no two clients are alike. Each situation must be evaluated on its own merits. The following points discuss the relationship between the family home and aged care planning, as well as general themes that must be addressed in aged care financial planning.

Advantages of Keeping or Selling the Family Home

The following are some of the potential advantages of keeping a family home when you or a loved one enters an aged care facility:

- Reducing the asset base for calculating the means-tested care fee payable; 

- Retaining an asset from an asset class that has historically performed as well or better than any other asset class; 

- The ability to borrow against the home; 

- The ability to derive rent from the home; 

- Maintaining capital growth exposure in cases of relatively long stays in residential care; 

- Maintaining wealth in a CGT-free  investment 

-  Personal wellbeing benefits from knowing that the family home has been retained; and

- Potential compatibility with inheritors’ plans (that is, your inheritors may well inherit more if you keep the family home for longer.

The potential benefits of selling a family home include:

- Paying cash for the Refundable Accommodation Deposit ('RAD') required by most homeowners when entering an aged care facility; and

- Achieving an effective rate of return of 7.04% when paying the RAD as a lump sum.

- Avoiding the need for complicated financial management, such as the use of reverse mortgages or the management of a tenancy;

- Freeing up cash flow to be used for other lifestyle choices, such as paying for extras in the aged care facility; and

- Simplifying matters, especially when multiple people are affected by a decision.

Which should we choose?

There is no right or wrong answer here. Each situation should be dealt with on its own merits. If you or someone you love is considering moving into an aged care facility, please contact us; we would be happy to work through the issues for and with you.

We discussed the advantages of either buying or selling a family home in a previous article. In this post, we will discuss some of the most important factors to consider when deciding what to do with your family home.

Find out more

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