When one or both members of a couple enter aged care, they are normally considered to be “illness separated” for pension means testing.
Under this classification, combined assets and income are assessed and the couple asset and income thresholds are applied, but the rate of pension is higher – at the maximum rate, it is equal to two times the single rate, which many people wrongly interpret as being assessed as a single.
Being classified as “living separately and apart” doesn’t mean that you need to divorce and it certainly doesn’t mean that you cannot visit or provide financial support.Credit:Louise Kennerley
However, for some, it is possible to be treated as two singles when one or both members of the couple move into aged care. It is called “living separately and apart”.
It sounds a lot like being illness separated but it is very different.
Couples who are classified as “living separately and apart” – this classification can be determined even if both members live in the same aged-care home – are not assessed based on the joint assets and income of the couple, but as individuals.
No more what’s your is mine and vice versa. You can declare your assets and income on the basis of what you each own.
Being classified as “living separately and apart” doesn’t mean that you need to divorce and it certainly doesn’t mean that you cannot visit or provide financial support.
Key to meeting the criteria of “living separately and apart” is the care needs of at least one member of the couple, meaning that they are both physically separated and no longer able to participate in a member of a couple relationship. For example, one person may have moved into an aged-care home because of advanced Alzheimer’s disease.
Let’s look at an example.
Fred and Shirley are pensioners. They have a house and shares in Fred’s name valued at $900,000 and $300,000, respectively, a joint bank account of $85,000 and personal assets of $10,000.
Shirley is entering aged care and has a condition which qualifies for being classified as “living separately and apart”. Fred will stay at home.
If Fred and Shirley were assessed as an illness-separated couple, the home would be exempt because Fred is living there, and half of the shares, bank accounts and personal assets would be assessed as Shirley’s.
Shirley would need to pay the market price for her accommodation, which could easily be $500,000 or more, and a small means-tested care fee of just over $1 per day.
Compare this with being classified as “living separately and apart”, where Shirley would be considered a low-means resident with no accommodation contribution and no means-tested care fee.
The difference, based on a $500,000 room, is about $25,000 a year, if she paid by daily payment.
However, if you are thinking about such a strategy, it is crucial to get advice from a retirement living and aged-care specialist.
You see, if the house is jointly owned, the spouse would normally exempt the other person’s share of the home for aged-care and pension means testing, but by separating, these exemptions are lost.
Just because you can, doesn’t always mean you should.
Rachel Lane is principal of Aged Care Gurus
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