Retirement and aged care financial planning is complex, but even more so for farming families…
Typically, the net worth of the retiring generation is tied up in the property and farming business, there is limited superannuation savings that can support retirement and aged care needs, and often no entitlement to social security safety net benefits.
There is also the added complexity of transitioning ownership to the next generation that needs to be considered.
It’s vital to plan ahead and prepare for your retirement and aged care needs without creating unsustainable debt for the farming business. You need to know your options.
In my experience, most people leave retirement and aged care planning until it’s too late. This can result in planning under stress, unnecessary financial implications, aged care decisions made by family members or ending up with care that neither aligns with your needs nor your wishes.
It’s important to take control of the process and consider funding for retirement and aged care needs as part of your overall succession plan.
Have a plan in place
It’s likely your farming business involves the whole family, and it’s important to take a structured approach and document how the business will continue when one generation hands over to the next. The retirement and aged care needs of the older generation, and their legacy wishes for farming and non-farming children, need to be among your key discussion points.
A succession plan can help prevent unintentional financial consequences for the farming business when focused consideration is given to structuring your assets appropriately, balancing tax implications and the ongoing needs for the business. Setting a clear strategy for the future will also help avoid complications with family relationships.
Proactively plan for your older generation
Residential aged care is partly funded by the government, and costs can be significant and may vary considerably depending on the type of care needed.
The fee you pay for aged care is means-tested. It will reflect your personal financial circumstances, how your assets are structured, if you sell your family home, and whether you move into aged care as a couple or as an individual. It’s vital to seek professional financial advice to understand your options and the financial implications associated with your decisions.
Start early
While 65 may feel a bit ‘young’ to be thinking about aged care, there are plenty of compelling reasons for getting organised well before you need these services.
‘Ageing in Place’ services such as Home Care Packages are increasing in demand. All too often older Australians only engage in the system after a major health incident. This often results in the immediate need for residential aged care and, decisions are often taken out of your control, and made by others.
Occupancy rates for aged care facilities are running at around 90% [1] which means there are minimal places available at any one time and a facility that is most suited to needs and care levels may not be available.
We recommend registering with My Aged Care early. Then at the first signs of ill health or decline arrange a health assessment with an Aged Care Assessment Team (ACAT). High demand can cause lengthy waiting times for this assessment that can help you access services that may enable you to remain in your own home longer.
Seek professional financial advice
Seeking financial advice early is vital for understanding your financial options and exploring strategies that will best suit your circumstances.
We can help. We have first-hand experience implementing solutions for farming families which make allowance for the unique needs of aged care planning with farming business needs. The following illustration provides an insight for some of the options available, depending on individual circumstances:
- Making a partial payment of the Refundable Accommodation Deposit (RAD) to preserve their business cashflow.
- Including Aged Care responsibility as an Agreement within a Succession Plan rather than a lump sum payout affecting business profitability.
- Implementing asset restructuring scenario planning for reducing aged care costs and increasing access to entitlements.
- Structuring investments to free cashflow for ongoing aged care costs.
At Active Financial Management, we have specialist skills in helping farming family businesses implement succession plans to make the most of their personal and business situation, including retirement and aged care needs. We can act as a central coordinator with your tax and legal specialists to ensure a comprehensive overview of your affairs is considered to support you through what can be a stressful time.
If you would like to know about retirement and aged care planning for farming business owners, I invite you to contact me today on 08 8253 2906 or email info@financialservicessa.com.au
Phillip Dibben is a financial adviser at Active Financial Management. Active Financial Management and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306 trading as Fortnum Financial Advisers.
This information does not consider your personal circumstances (including taxation) and is of a general nature only. You should not act on the information provided without first obtaining advice specific to your circumstances.
[1] http://omsgroup.com.au/average-occupancy-rate-in-aged-care.php