Do we need to sign a Caveat or be a Guarantor to Aged Care Providers?

If you are entering aged care, the aged care provider may ask for your family member or legal personal representative (LPR) to sign a guarantee. This is completely normal and every provider has a slightly different policy around it.

It is not compulsory for a guarantee to be provided, but if it is part of the admissions process and if your family declines to sign, you may not be offered a place.

The guarantee covers payment of all fees and any damages you may cause in care.

Aged care providers may ask for guarantees to protect their ability to recover unpaid fees or any other amounts owing under the agreement. These amounts may include payments towards the RAD if the RAD or mixed combination payment method was selected in the contract (due 6 months after the date of permanent entry).

Providers sometimes experience children (who have control over finances) draining their parent’s bank accounts or failing to plan adequately and do not meet their financial obligations.

The Resident Agreement is only a contract between the resident and the provider and if fees are not paid the option exists to sue the resident, but this is very difficult to do so and leads to bad publicity. So, some facilities ask the family for guarantees to ensure the fee obligations are met.

Ensure that you have both Enduring Powers of Attorney (Financial and Personal) and Enduring Powers of Attorney (Medical Treatment). These are two separate documents. If you lose capacity, only an attorney appointed under these instruments can make decisions on your behalf
(including decisions such as signing a contract to enter an aged care facility).

It is important that you seek legal advice to understand the risks and obligations.

Can I give or gift money to my family?

The simple answer is yes but be careful of the financial consequences.
The rules around gifting for aged care are in line with pension rules around gifting (deprived assets). Any gift you make in excess of $10,000 in a financial year and $30,000 in the five years prior to entering aged care will be assessed as an asset and deemed to earn income.

This assessment will impact the calculation of:
– Your pension entitlement
– Determining if you are eligible to be a low-means resident
– The amount of accommodation payment you can be asked to pay
– The amount of means-tested care fee you will be charged.
-Entitlement to apply for Hardship down the track.

You are expected to use your own resources to look after yourselves and gifts will reduce your available resources. Therefore, the government limits how much you can give. Amounts gifted above the allowable limits are “deprived assets” and assessed as financial assets. This excess is included in the assets test and income test (under deeming rules) for five years from the date of the gift.

In a typical scenario, Rosa gifted $20,000 on 01 May to her daughter.
This reduced her bank account by $20,000 but $10,000 is added back as a deprived asset for five years.
Caution should be advised before gifting any money using a Power of Attorney document or when the capacity of the donor is in any question.

If you have any questions, consulting with an Aged Care Expert is a great way to learn more about your best options. Get in touch with one of our Aged Experts for a discussion.