How to pay the bond?
One of the commone questions we get asked is 'How do we pay the aged care bond?'
An Accommodation Bond can be paid in 3 ways, as a;
- Lump sum
- Periodical Payment
- Combination of both
As no two people are alike, which method you select will be driven by;
- Your financial situation
- You may or may not have enough to pay the bond ALL as a lump sum
- Your preference
- The financial outcome desired
- The consequence of various options
- eg If you sold shares to pay a bond, there may be a CGT liability
- You may lose income from investments cashed in, and hence might not be able to afford the aged care fees
- What if a valuable asset was sold and the elderly person passed away soon after moving into care
- What if it took a long time to sell the asset (eg property, retirement village etc
PAYING THE BOND AS A LUMP SUM
In order to pay the bond as a lump sum, you will need to consider;
- Do you have enough to pay the bond as a Lump Sum in full
- SHOULD you pay the bond in full ? there are situations where paying the bond all as a lump sum is NOT a good option
- Maybe borrowing money to pay a bond might be a good idea
- From family
- From a bank
However borrowing money from family has some potential pitfalls that require VERY careful planning & borrowing from the bank may be a viable option, BUT there are very few lenders who deal in these types of loans
- Whether to sell other assets to raise the funds to pay the bond, eg:
- Selling shares
- Selling Managed Investments
- Cashing in an Allocated Pension- Beware of jumping into this option
- Selling Land or other properties
- Selling the home
Selling assets may incur CGT, and may incur costs, eg commissions to Real Estate Agents.
Which asset to sell, becomes a very personal decision and frequently requires discussion with a specialist to help you understand the consequences of such an action.
WE once had a client whose mother had a very valuable Sydney property & an equal amount of shares and they were undecided as to which to sell to pay the bond.
Our consultant discussed the issues;
- would there be any CGT Payable if the shares were sold
- Shares are homogenous, ie if shares were sold to pay the bond (ignoring CGT) & IF the person who entered care passed away very soon after entering care, then the same shares could be repurchased (if the family wanted the shares) once the bond was refunded, ie it won?t matter whose shares are purchased. WHEREAS if the home was sold & the person passed away, soon after that same home was sold, that home could not be repurchased easily, ie there is difference in emotional attachments between assets, & the liquidity of the asset may also be a consideration
- Are there any emotional or psychological aspects to the asset- sometimes the home has emotional attachments
The Accommodation Bond is Government Guaranteed (Federal Government) if the facility is fully Accredited, and it MUST be repaid within 14 days of leaving the facility or 14 days from the grant of Probate (following death)
Interest will be earned on the Accommodation Bond following the resident vacating the the bed permanently until it is repaid
BALANCE FINANCIAL SOLUTIONS CAN DISCUSS THE OPTIONS AROUND PAYING THE BOND WITH YOU AND HELP YOU FIND THE BEST WAY TO PAY THE BOND THAT SUITS YOUR NEEDS
WHY NOT CALL US FOR AN APPOINTMENT ON (02) 8814-7307