How to Protect Assets if Your Spouse Goes into a Nursing Home in Australia

The transition of a spouse into a nursing home is often an emotionally challenging experience that raises a host of practical and financial questions. For many families in Australia, especially in Queensland, this move can have significant financial implications, particularly when it comes to protecting shared assets from potential impacts of aged care costs and means testing.

In this guide, we’ll explore various strategies on how to protect assets if your spouse goes into a nursing home in Australia. We’ll discuss the financial and legal considerations as well as practical steps to support your family through this change.

 

Emotional and Practical Considerations for Families

Before diving into the legal and financial strategies, it’s crucial to acknowledge the emotional and practical challenges involved. Moving a spouse into a nursing home often requires difficult conversations and careful planning. Here are some practical steps to consider:

  • Open Communication: Talk openly with family members about the decision and the steps involved. Transparency can help alleviate stress and prevent misunderstandings later on.
  • Family Support: This time can be emotionally taxing. Consider leaning on family, friends, or support groups who understand the challenges of managing care and financial decisions.
  • Plan for Regular Visits: Remaining connected with a spouse who’s in a nursing home can be emotionally beneficial for both of you. Establish a schedule for visits that allows for consistency and maintains a sense of closeness.

 

Why Protecting Assets if Your Spouse Goes into a Nursing Home Matters

When a spouse enters a nursing home, the financial requirements can be substantial. Nursing homes in Australia charge fees based on a means test that assesses both income and assets to determine the amount payable for residential aged care. This means test could impact both spouses' financial security, as it may include not only individual income and assets but, in certain cases, shared assets as well.

Ensuring that your assets are protected can help maintain financial stability for the spouse remaining at home, as well as preserve inheritance for children and future generations. Protecting assets also reduces the likelihood of financial strain and ensures that funds are available for other needs, both current and future.

The means test assessment includes most assets, such as:

  • The family home (with certain exemptions)
  • Cash savings and bank accounts
  • Investment properties
  • Shares and other investments
  • Superannuation

However, certain strategies can be employed to minimise the impact of these assessments, helping to secure assets for your future needs. For more information, head to the government’s MyAgedCare site.

 

Is the Family Home Considered an Asset?

The family home is typically the most valuable asset couples own, and fortunately, it is often given special consideration in the aged care means test. Under Australian aged care rules, the home may be exempt from the means test if one spouse continues to live there while the other moves into a nursing home. This exemption applies as long as the "protected person" (the spouse living at home) continues to reside there.

However, if both spouses eventually move into aged care, the family home may no longer be exempt, and its value could be included in the means test, which can significantly impact aged care fees. For this reason, understanding how to protect this asset, along with other assets, is essential.

 

What is a Protected Person in the Context of Aged Care?

In the context of aged care means testing in Australia, a "protected person" is a specific designation that can influence whether certain assets, like the family home, are included in the means test calculation for aged care costs. This designation can help shield assets from being considered in the means test, which in turn can reduce the amount of fees or contributions required for residential aged care.

A protected person typically refers to a spouse or another dependent who continues to live in the family home. The following categories usually qualify someone as a protected person:

A Partner or Spouse: If one spouse remains in the family home while the other moves into aged care, the home is generally exempt from the means test as long as it is the primary residence of the spouse remaining at home. This exemption exists to protect the remaining spouse from potential financial hardship by ensuring they can continue living in the home without it being factored into the aged care fees.

A Dependent Child: If a child (under 16 years of age) or a dependent child (16 to 24 years of age who is financially dependent on the resident) resides in the family home, the home may be protected. This exemption aims to provide stability and security for young or dependent children by ensuring that the family home is not factored into the aged care means test.

A Close Relative with a Disability: In cases where an adult child or other close relative who has a disability resides in the home, they may be considered a protected person. This provision exists to support those who rely on the family home for housing due to their disability and may not be able to secure housing on their own.

A Carer: A carer who has been living in the family home for at least two years before the spouse’s move into aged care may also qualify as a protected person. However, the carer must have been providing ongoing care and must meet specific eligibility criteria. This rule is in place to prevent carers, who may have few financial resources of their own, from losing their residence due to the entry of the homeowner into aged care.

 

Strategies to Protect Your Assets

Here are some effective strategies for protecting your assets if your spouse needs to move into a nursing home in Australia.

1. Ensure One Spouse Remains in the Family Home

As mentioned, if one spouse or “protected person” remains in the family home, its value is generally exempt from the aged care means test. This is often one of the most straightforward ways to protect a significant asset. The family home remains a "protected" asset while a spouse resides in it, shielding it from impacting your spouse’s means-tested aged care fees.

2. Consider a Financial Agreement

A Binding Financial Agreement (BFA) is a legal agreement between spouses that can define asset ownership and division, including assets that are separate or jointly owned. Although BFAs are commonly used for divorce and separation, they can also be beneficial in situations involving aged care and asset protection.

In some cases, a BFA can specify the division of certain assets, potentially protecting them from the means test if they are allocated to the spouse remaining in the community. It’s important to consult with a family lawyer experienced in asset protection and financial agreements to understand how a BFA might benefit your specific situation.

3. Explore Gifting and Transferring Assets

Another option to reduce assessable assets is by gifting or transferring certain assets. However, gifting rules apply under Australian law, and there are strict limits on how much can be gifted without impacting the means test.

The current limit for gifting in Australia is $10,000 per financial year, with a maximum of $30,000 over five years. Any amounts exceeding these limits will be counted as a “deprived asset” and still considered in the means test for five years. Transferring assets to children or other family members can be a strategy, but it must be done carefully to comply with these gifting rules.

4. Set Up a Testamentary Trust

A testamentary trust is a type of trust established as part of your will, activated upon your death. This structure can be an effective way to protect assets for the benefit of family members, particularly children, and limit the impact on the aged care means test.
For example, if you are the spouse moving into aged care, placing certain assets in a testamentary trust for your spouse or children can protect these assets from being counted in the means test. Testamentary trusts provide flexibility and control over asset distribution and are often used in estate planning to protect inheritances for future generations.

5. Engage in Advanced Estate Planning

Planning for aged care needs as part of your overall estate planning is one of the most effective ways to safeguard your assets. Working with an experienced lawyer can help you create a comprehensive estate plan that takes into account your financial situation, future needs, and asset protection strategies.

Your estate plan might include setting up trusts, restructuring asset ownership, and developing strategies to ensure minimal financial disruption if one spouse requires nursing home care. Queensland’s Succession Act 1981 is relevant here, as it governs how estates are handled in Queensland, and a lawyer familiar with this legislation can guide you in aligning your estate planning with your goals.

6. Superannuation Considerations

Superannuation is generally not included in the means test while the account holder is under pension age or if the remaining spouse is still working. However, once the member reaches pension age, their superannuation balance may be assessed as part of the assets test.

Transferring superannuation to the spouse who is not going into care or restructuring superannuation investments can help protect these funds from being counted in the aged care means test. It’s essential to get professional financial advice to manage superannuation effectively in the context of aged care.

 

Protecting Assets If Your Spouse Goes into a Nursing Home in Australia: Final Thoughts

Deciding to move a spouse into a nursing home can be an emotional and complex process. Ensuring that your assets are protected during this time requires careful planning and a thorough understanding of Australia’s aged care and family law regulations. Whether through strategies like financial agreements, testamentary trusts, or advanced estate planning, taking the right steps can help preserve your wealth for future generations. It’s essential to seek advice from a lawyer before making any significant changes to your financial situation.

At Pullos Lawyers, we understand the emotional and financial impact that aged care decisions can have on families. Our empathetic and experienced family law team is here to provide personalised advice tailored to your unique situation, providing peace of mind and the ability to better manage the financial implications of a spouse entering aged care. Contact Pullos Lawyers today to discuss how we can help you protect your assets and plan for the future.