It’s time to talk to Mum and Dad about aged care and their plans for later life

There is a conversation that many families put off because they can’t find the right time, the right words, or just don’t want to have a difficult talk: where do Mum and Dad want to live as they get older?

As a financial adviser, I’ve seen what happens when that conversation starts too late. A parent has a fall, receives an unexpected diagnosis, or reaches a point where living independently is no longer possible. Suddenly the family is making significant financial and lifestyle decisions under enormous pressure.

Adult children are scrambling to understand an aged-care system they have never navigated before. Parents may be unwell or unable to fully participate in decisions, and siblings can have different views.

Then there’s the emotional question of what happens to the family home.

These are decisions that all deserve to take time.

Planning for ageing isn’t simply about whether someone will eventually enter residential aged care. The better question is: How do you want to live as you get older, and what do we need to put in place to make that possible?

Start the conversation early while everyone can participate.

Have the conversation before it’s urgent

It doesn’t have to begin with finances. Ask your parents whether they want to remain in their current home. Is being close to family important? What would happen if one parent needed substantially more care than the other?

If staying at home is the preference, start looking at whether their current house can support that.

A much-loved two-storey family home with difficult access, steps and unsuitable bathrooms may work beautifully at 65 but become challenging later. Home modifications, accessibility, proximity to family, health services and support networks can all become part of the conversation.

This doesn’t mean making decisions today. It means understanding the options while there’s still time.

Understand residential aged care before you need it

Residential aged care can introduce an entirely new financial language.

Depending on circumstances, a person will agree on a room price with their provider and pay it as a refundable accommodation deposit, a daily accommodation payment, or a combination of the two.

Choosing to pay part of the RAD — the current average is about $570,000 — requires parents to have the liquid funds to do so. Not paying all of it or part of it means this will be paid as a DAP.

The aged-care rules require providers to use the applicable maximum permissible interest rate on the DAP — currently 8.51 per cent — when calculating this as daily accommodation payments.

For families entering the system during a health crisis, trying to learn those concepts while simultaneously choosing care is overwhelming.

Where will the money come from? Will other assets fund the accommodation? What happens to cash flow? And what if one member of a couple enters care while the other remains in the family home?

The answers can have implications far beyond the immediate aged-care decision. That’s why selling the family home shouldn’t become an automatic reaction under pressure.

Retirement living is another conversation

For some parents, the next move might instead be to a lifestyle village.

The social benefits and lower-maintenance lifestyle can be very attractive. But families should understand the financial and legal arrangements before signing anything.

This isn’t just about asking “Can Mum and Dad afford to move in?” It’s also about understanding what happens if circumstances change and they need to leave.

Again, planning creates choices. Waiting for a crisis reduces them.

Don’t overlook living with family

Another option is an arrangement where an older parent lives with an adult child, sometimes through a granny-flat arrangement.

Importantly, for social security purposes a “granny flat interest” isn’t necessarily a physical granny flat. It can involve exchanging money or assets for a lifetime right to live in someone else’s property, and the arrangement can affect government-paid entitlements and asset testing.

Services Australia recommends obtaining financial and legal advice and having the arrangement documented. These arrangements can work incredibly well. An older person has family nearby and adult children provide support. But it needs to work for both generations.

Family relationships, Centrelink implications, estate planning and what happens if circumstances change all need to be discussed openly before money or property changes hands.

We spend decades planning for retirement, but often very little time planning for the later stages of our lives.

So please don’t wait until Mum is in hospital, Dad can no longer manage the house, or someone tells you a decision needs to be made by Friday.

Put the kettle on and start talking now.

Ask where your parents would like to live. Ask what matters most to them. Talk about the family home. Understand what resources are available and who they want involved in future decisions.

You don’t need to resolve everything in one conversation. The important thing is to start it.

When it comes to ageing, having choices is valuable, but having the time to make those choices together as a family and before a crisis hits is priceless.

Dawn Thomas is a senior financial adviser at The Wealth Designers

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