- Finance is very much a family matter.
- Communicate your financial wishes, plans and knowledge to family members.
- Try to avoid financial misunderstandings, even if they may be inevitable.
It probably doesn't make sense getting your family involved in the nuts and bolts of the financial planning process. However, helping them understand the wider benefits of financial planning is one of the best things you can do.
Educating your family about all things financial
Hopefully, your adviser may have helped you get into some good financial habits, which can be passed on to your children or other family members at any age.
It's great to educate children about money and the importance of saving for the future, meeting goals and understanding investment risks.
Tip
If you give your children pocket money, encourage them to save for something they really want instead of things that may only give fleeting enjoyment.
Further, buying your children things at the drop of a hat or to keep the peace makes it harder for them to appreciate the value of money.
|
If you need to set a budget in order to achieve your financial goals, it's going to be easier when everyone is on the same page. Best-case scenario is that your kids will hopefully understand why you didn't buy them those extra toys for their birthday.
Consider
Avoiding talking about financial differences with your partner can lead to resentment, particularly for the main breadwinner. Sometimes, you may have to have difficult conversations to bring any monetary issues into the open. Pick the right time and place to do so and don't put it on the backburner.
|
You and your spouse may have different attitudes to money. For instance, one member of a couple may see credit cards as a means of freedom and instant gratification, while the other may see them as a debt trap which increasingly snares them over time. Or what one member sees as thrifty and sensible may be seen as stingy and mean by another.
A granny flat sounded good at first, but ...
A granny flat agreement or interest can be surprisingly flexible and does not always mean having to build a separate residence to accommodate an elderly family member. However, they come with a range of Centrelink asset conditions (particularly around asset deprivation) that may impact on Age Pension entitlements. They can also affect estate planning and lead to family problems (at worst, legal) if things are no longer harmonious.
|
Aged care
It's a well-established fact that people are living longer. While this has its positives, it also brings concerns, such as:
- avoiding being a burden on your family
- having your money eroded by retirement living costs, particularly if you want to leave an inheritance for your children
- finding aged care accommodation options that best suit your needs and resources
- exploring suitable alternatives to residential aged care (e.g. independent living or assisted living in a retirement village) not tied to government requirements and fees; or a government-subsidised homecare package (e.g. meals, transport, cleaning, specialised health services, and even gardening) available in your house, unit or retirement village
- living away from your spouse due to age- or illness-related conditions
- the aged care assessment process
- entering into an agreement with an aged care facility (akin to a nursing home)
- fees and charges.
Consider
The need for aged care is often triggered by an unforeseen health event involving yourself or a family member. The timing of such an event may be hard to predict and prepare for in advance. For example, an otherwise healthy older parent having a fall and breaking a limb.
- Things that have a wider impact and may need to be taken into account include:
- the diversion of time and resources to become a surrogate 'manager' of other people's finances and assets (e.g. selling a house to release funds to pay for aged care) if they lose capacity or lack the expertise or confidence
- ready access to sufficient funds (which can be an obstacle if they are in another person's name) to cover expenses
- whether the necessary estate planning documents are on hand so you can either delegate to or make decisions for others (covered in more detail later in this section).
|
Eligibility for aged care
Accessing aged care assistance for some level of federal government support (either monetary, accommodation or help around the home) hinges on an Aged Care Assessment Team (ACAT) (ACUS in Victoria) reviewing your situation and issuing an ACAT number and care codes relevant to the type(s) of care you are approved for.
This is not something you can get in advance when you are healthy or reach a certain age then put in your back pocket for when needed.
Further, these codes are like a passport that must be obtained before any services can be actioned or enquiries made. For example, when you phone an aged care facility to see whether there are any places, the first question you will be asked is whether you have the relevant codes.
Types of aged care facility fees
Moving into an aged care facility can involve a substantial financial outlay, both initially and ongoing. Following is an overview of the associated fees.
Basic daily fee
This is set by the federal government, and everyone entering into aged care accommodation (either temporary or permanent) has to pay it. This fee is based on 85% of a single Age Pension. From July 1, 2025 it is $63.82.
Note: Some facilities include a non-optional daily extra-service fee (averaging around $30-$60) commensurate with the standard of services and accommodation. It may include things such as hairdressing or particular types of food.
Means-tested care fee
This is a federal government charge which may entail a permanent resident in an aged care facility contributing an additional daily amount towards their accommodation to 'share the load'. It is based on a means assessment of income and assets, and subject to annual and lifetime caps of $34,311.23 and $82,347.13 respectively (from July 1, 2025). This fee can change, depending on your circumstances.
Note: The means-tested care fee is based on disclosing income and assets to Centrelink via a specific form, and is the smaller amount of the actual versus estimated cost of daily care. In some cases, it may be $0. Disclosure is not mandatory, however, not doing so may mean paying the theoretical maximum which could be around $417 per day.
Accommodation fee
This comprises an additional cost which can be paid as a lump sum or periodically.
The accommodation fee can be either:
- an upfront lump-sum refundable accommodation deposit (RAD) which can vary greatly (e.g. $350,000 to $1,400,000), depending on the facility
- a daily accommodation payment (DAP) based on the federal government's maximum permissible interest rate (currently 7.78%) x RAD / 365
- a daily accommodation contribution (DAC) where the federal government helps with the costs determined by a means assessment
- an upfront refundable accommodation contribution (RAC) for which the federal government partly subsidises the cost based on the DAC.
| Tip
A higher RAD doesn't necessarily mean getting more for your dollar, so it is worthwhile inspecting a number of aged care facilities before deciding on accommodation.
Many facilities allow you to 'try before you buy' on a respite care basis for a few weeks at a daily rate of $63.82 plus an additional services charge, if applicable.
|
Note: It is possible to combine a part-DAP and part-RAD to align with your budget. For example, for an agreed room price of $550,000, $250,000 could be paid as a lump sum, and the balance as non-refundable daily payments.
| Example: The daily cost of permanent residential aged care
Li has recently become a permanent resident at an aged care facility. The applicable costs are as follows.
Basic daily fee: The facility charges the basic daily fee of $63.82, as well as a daily additional services fee of $36.00 (combined $99.82 per day).
Means-tested care fee: Li completes a means-care assessment which results in her incurring a daily means-tested care fee of $82.00 (until she reaches the annual and lifetime caps).
Accommodation fee: The aged care facility charges a RAD of $950,000 for a single room. Li can't afford this amount upfront, so instead she opts to pay a DAP until her house is sold and funds are released.
The DAP is $202.49 ($950,000 x 7.78% / 365 days per year).
Outcome: Based on her current situation, Li would need to pay the sum of these fees on a daily basis, amounting to $384.31 ($99.82 + $82 + $202.49).
|
Bracing for the fees and stumping up the cash
As mentioned, while aged care may seem peripheral to your current financial planning considerations, circumstances can change quickly and you may be 'thrown a curveball' where you need to find often-substantial funds in a short timeframe to cover your or another person's aged care accommodation costs.
A financial adviser's services should be sought regarding the issues discussed in this section, including tax and social security impacts, particularly in relation to homeowner versus non-homeowner status. If you are going down the DIY path, the federal government's My Aged Care website (myagedcare.com.au) is a good resource.
Estate planning
Estate planning is another important reason for getting the family involved in the financial planning process. If you want to distribute your estate between your children and grandchildren, it's helpful to discuss why you divided your estate in a particular way regarding the beneficiaries. That way, if there's an objection you can explain the reasons.
A financial adviser can give you information on the various elements of estate planning and may be able to recommend a solicitor to help you with the process.
The importance of a Will
A Will is a way of making sure your assets are distributed as you want them to be after you have passed away. The person who makes a Will is known as the 'testator'. Many people never get around to making a Will or assume that a less formal document, such as a letter or note, will be just as effective.
However, if you die without having made a Will (that is, 'intestate'), then your estate will be managed by the public trustee in your state or territory (at a substantial cost) and it may be a long time before your assets find their way to the beneficiaries or, worse still, your wishes may not be fulfilled in terms of intended beneficiaries.
Making a Will is not necessarily difficult, and a solicitor can help you do this for as little as a few hundred dollars if your Will is relatively straightforward.
As part of the Will-making process, you will need to appoint an executor, who is essentially a person to take on the administration and distribution of your estate after you've gone.
When happy families aren't so happy
While Wills are primarily a robust estate planning solution, there are times when they can be challenged. For instance, if you make a substantial gift to a charity, your family may be able to make a family provision claim under the relevant state and territory legislation.
|
Testamentary trusts
A Will enables you to create what is known as a 'testamentary trust' to hold and distribute your assets after death. You can choose an executor or trustee to distribute your assets in accordance with your wishes or give them the power to use their discretion. Assets can remain within the trust for up to 80 years and can be managed in accordance with the trust provisions in your Will.
Although they offer asset-protection and distribution benefits, testamentary trusts are often more costly to establish and maintain compared with a standard Will. If your estate isn't large or complex, a testamentary trust may be 'over and above' your needs.
Before proceeding down a testamentary trust pathway, it is recommended that you seek financial and/or legal advice.
Consider
Testamentary trusts can help address concerns and fears about dying while your children are relatively young, or if you have a disabled child and are worried about their welfare after you've gone. This is particularly relevant, given that nowadays it is common for people to have children later in life.
|
Special disability trusts
A special disability Trust (SDT) allow families to privately finance current and future care and accommodation needs of a severely disabled family member.
The purpose of an SDT is to protect the interests of the person with disabilities. Expenditure of SDT funds is restricted to meeting reasonable care and accommodation needs of the principal beneficiary, and costs associated with administration of the trust.
However, the trust cannot be used to meet the costs of care, accommodation or services provided by the trustee or a partner, parent, or an immediate family member.
An SDT can be a testamentary trust that comes into effect once the Will-maker dies. Both an asset value limit indexed annually
($813,250 from 1 July 2024) and income from the trust do not count towards the principal beneficiary's income support payment. The principal home of the principal beneficiary, if owned by the SDT, is not an assessable asset.
Gifts made by immediate family members to a complying SDT may be disregarded for the purposes of the donor's income support payment.
What if I can no longer make decisions or fend for myself?
Powers of attorney
You may have heard the term 'enduring power of attorney' or EPA. An EPA is a legal document that enables you to appoint someone to look after your affairs and financial matters. The main point of an EPA is that it is 'enduring' and continues to operate even if you no longer have the mental capacity to make decisions after signing the EPA.
This contrasts with a power of attorney (POA), which can be issued to a trusted family member to make decisions on your behalf in situations such as an extended overseas holiday. However, it is no longer valid if you lose decision-making capacity or die. EPAs and POAs are limited to providing direction on assets and finances as opposed to medical and lifestyle matters.
Enduring guardian
There is also enduring guardianship, where you can appoint an enduring guardian to make important lifestyle or medical decisions in situations when you are no longer able to do so.
Advanced care directive
Another option is an advanced care directive or 'living will', specifying your instructions if you lose capacity to make medical and lifestyle decisions and can't communicate your wishes. It should reflect your values about things such as:
- care preferences (e.g. at home, a hospice or an aged care facility)
- treatments you would accept or refuse (e.g. CPR or being placed on life-support)
- tolerance to particular situations (e.g. the inability to feed, wash or dress yourself).
It is possible to make an advanced care directive as well as having enduring guardianship at the same time.
Consider
An advanced health directive effectively takes the decision out of others' hands and provides clarity in crisis situations such as a seriously ill or dying parent whose siblings have different stances and beliefs around health and life issues.
|
What happens to my superannuation?
Essentially, superannuation is not an asset that can be distributed as per your Will. Instead, the superannuation fund trustee carries this out in accordance with either a binding death benefit nomination (BDBN) or non-binding nomination.
A BDBN is a legal document where you nominate a dependant or dependants, for example, a spouse, child, or person financially dependent on you to receive your superannuation savings once you have passed away. A BDBN requires you to renew or confirm your nominations every three years.
Note: Some superannuation funds now offer the option of a non-lapsing BDBN.
In the case of a BDBN, the trustee doesn't have any say or discretion in deciding who receives your superannuation.
Conversely, a non-binding nomination gives the trustee discretion to distribute your post-death superannuation, taking into consideration the situation of any beneficiaries at the time.
Elder abuse
It's a sad fact of life that some children may have inheritance impatience, and pressure or bully their parents to give them money or hand over control of their financial affairs. Financial advisers are obligated to report suspected elder abuse and are often in a position where they will see red flags, such as out-of-character behaviour or being accompanied by a controlling family member to meetings. If this applies to your situation, speak to your financial adviser or the police.
Business succession planning
Financial planning and business succession planning are often intertwined. If you own a family business, it pays to get the next generation involved in the financial planning process, particularly if you are looking for some assurance that your legacy will continue.
If the next generation is not into the family business
Ideally, you may want a family member to take over the family business when you retire or pass away. However, your intentions might not resonate with the next generation, as they may not share your motivations and drive, or they may want to do something else work-wise.
This may be a sign to think about getting your business ready for sale, which is a major consideration in the financial planning process.
|
