THE sobering truth is, many residents enter a retirement village without fully understanding their agreement nor its financial consequences. “Surprises are great for Christmas and birthdays, but not for legal documents!” says KJB Law principal, Jo Twible. 

When entering a retirement village, a prospective resident should get detailed legal and financial advice, specifically relating to the contract(s) and their own situation.

A range of operators in the marketplace offer a range of financial models, and each model has different benefits and consequences.

When entering a retirement village, you'll be asked to sign a contract and these contracts can include formulas calculating the amount payable upon exit from the village.

Good advice should help quantify the amount you'll pay based on different scenarios.

For example, if a contract says you pay a departure fee of 6 per cent per year capped at 30 per cent after five years on an ingoing contribution of $700,000 and get no share of capital gain, then you need straightforward advice that makes it very clear that this means that the departure fee at the one-year mark is $42,000 and by the five-year mark it is $210,000.

If you stay in the retirement village for five or more years, you'll get back $490,000 as a starting point. Any additional amounts that might be deducted should also be clearly explained.

That is one typical example. Jo and her staff are able to sit down with you and look together at your own specific situation. We always provide our advice in writing which you can take away and discuss with family.

“Advice should be in writing and in plain English,” Jo says. “A prospective resident should be encouraged to share that advice with their family because, while it's the resident who might be dealing with the transaction when entering, it's often a family member who's assisting them when they exit.

"There should never be a situation where a family member thinks: ‘Mum wouldn’t have signed this if she'd known!’

“Tailored financial advice is important, too. Prospective residents need to not just be thinking about this move, but the potential following move into an aged-care facility. Quite often when we see clients they have no understanding of the framework for aged care and potential costs."

"There are reasons that retirement villages need to charge some of the fees they do — they must  ensure that they have the funds to meet their legislated obligations," Jo says.

"The recent media attention only served to highlight the vital need to get clear independent legal and financial advice on every contract — before you sign — when you're looking to enter retirement living.

"This is one reason why KJB Law and Phillips Wealth Partners run regular public education seminars on retirement village entry and aged care. We want people to have some basic under-standing before they start looking at retirement village options.

Jo says: “There are many well documented benefits to life in a retirement village, but these come at a cost.

"It’s important to ensure a prospective resident understands these costs and can determine, for themselves, whether the benefits are worth what they'll pay going into, during, and upon exit from the village.

"And that they'll have sufficient funds left over to meet their future care needs.”

● KJB Law and  Phillips Wealth Partners run occasional free

retirement living seminars at the Hellenic Club of Canberra.

● For details of upcoming seminars, call Shradha Deo on

(02) 6281 0999 or email her at shradha@kjblaw.com.au

Enquiries

(02) 6281 0999