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Typically, finances are kept separate because the future beneficiaries are not the same – i.e. his assets go to his children and hers go to hers. The greater the difference in wealth the bigger the problem.

Let’s look at an example. Take the case of a couple, in their second marriage, with no children from their marriage but both with children from their first unions.

The wife is wealthy, owns the marital home worth $1 million, has a share portfolio worth $700,000, $300,000 in cash and other assets totalling $50,000.

Conversely, the husband is of limited means with $80,000 of investments and $10,000 in other assets.

If the husband was assessed on his assets and income alone, he would be determined as a low-means resident, with the government assisting with the cost of his accommodation and care.

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However, because of his wife’s wealth, he would pay a market price for his accommodation, which could easily be $500,000, plus a basic daily fee of $52 and a means-tested care fee of $15 a day.

If the wife pays her husband’s care costs, it will be a hefty $135 a day, or almost $50,000 a year.

If she loans him money to pay a Refundable Accommodation Deposit (RAD) – assuming it’s $500,000 – it would still be included in the means test assessment but would save about $25,000 a year in interest.

The predicament is the lump sum is typically refunded to his estate, creating potential conflict with her step children.

So, what’s the solution?

Loan agreement option

One option is to have a loan agreement, so any RAD is repaid to her (or her estate) after he leaves care.

A loan agreement for all of his cost of care would likely mean that his estate would be left with nothing, if he lives in aged care for more than 18 months.

Another option would be to see if they can meet the criteria of a couple “living separately and apart,” so their assets and income can be assessed based on legal ownership. Being eligible to do this will depend on his care needs.

If the husband is to meet the cost of care from his own assets, then he could pay, say, $50,000 as a lump sum and deduct his fees from his lump sum. Under this scenario, his $50,000 will last for about a year.

If you don’t subscribe to the notion of “what’s mine is yours,” it’s best to plan ahead and work it out as a couple while you can, rather than leave it to children when the need for care is imminent.

Rachel Lane is a retirement living and aged-care specialist at Aged Care Gurus.