How do I know if I will have to pay a Refundable Accommodation Deposit when entering Aged Care?
In a recent article we talked about Aged Care costs and what they covered. You may remember that anyone with assets over $49,000 needs to pay an accommodation fee. Today let’s take a closer look at that.
Refundable Accommodation Deposit (RAD)
Up until a few years ago, anyone entering aged care would pay a bond for their accommodation, as tenants do when renting a home. Today you pay a Refundable Accommodation Deposit instead, at a price set by the facility.
It’s called a Refundable Accommodation Deposit because, as the name suggests, the deposit is fully refundable when you leave the aged care facility. In effect, it’s like making a loan to the facility which is repaid when you leave.
Will I have to pay the RAD?
If you have assets over $49,500, you will need to pay an accommodation fee of some sort. If your assets are valued at over $166,707, you will need to make a full accommodation payment. Don’t worry if you have no assets at all because there is a safety net in place to look after you.
How much is the RAD?
The RAD is set by the aged care facility and it must be published so the rate is clear and up front. It is possible to negotiate a lower fee with the facility but remember that the rooms are in high demand.
The average RAD across Australia is approximately $440,000 and can be as much as $1 million in inner city areas.
Why should I pay the RAD?
While there are a couple of ways you can pay your accommodation costs, and we’ll talk about those in the next article. There is, however, an advantage to paying the RAD. When you pay the RAD, you are paying for your Accommodation as a Lump sum payment. If you don’t do that, you will need to pay a daily rate with extra for an interest rate at a rate set by the government.
What that all means is that if you pay the deposit up front, you are saving money in the long term because you don’t have any extra interest charges to pay.
Remember, the RAD is fully refundable and it is Government Guaranteed, so if the facility is government accredited and something goes wrong, you won’t lose your money.
Your RAD payment is also considered exempt when working out your aged pension entitlements.
Will I have to sell the family home to pay the RAD?
Your home is considered as part of your overall assets unless an immediate family member or carer was living with you at the time you moved into care and still lives there. If the home is empty, it means your total assets will probably be over $166,707 and you will have to make a full accommodation payment.
You may have enough assets to pay the RAD without having to sell your home but remember you will still need to pay ongoing maintenance costs to keep it in good shape. It can be a financial burden.
This is an emotional time for you and your family. It would be wise to speak to a financial advisor before you make any big decisions about your RAD or your family home.
Can any family member live in the family home so I do not have to pay a RAD?
Unfortunately, no. The family member must be either a spouse, partner or dependent child. That is unless they have been someone who has been caring for you. If they are a family member who has been living with you in the family home and caring for you for two years or more and also has been receiving an income support supplement for your care, then a RAD may not be required. This can start to get a little complicated to it is best to call Centrelink and discuss your individual situation.
What happens to the RAD once it is paid?
The RAD is paid to the accommodation facility and can only be used for specific purposes such as making improvements to the facility and the quality of life it offers, for investments or for refunding the RAD.
How long do I have to make my decision about RAD?
You have 30 days from entering aged care accommodation to decide how you want to make your payment. If you choose to pay a lump sum (the RAD) you then have 6 months to pay the money to your provider. Until the RAD is paid, you will be a set daily fee with interest.
What happens to the RAD if I leave my aged care facility?
There are some set rules about the refund of the RAD.
If you decide to return home, the RAD must be refunded within 14 days.
If your care needs change and you need to move to different accommodation, the RAD will be refunded within 14 days and you will then pay the amount to the new facility.
In the event you pass away, the RAD is refunded to your estate within 14 days of receipt of a certified copy of Grant of Probate.
What does all this mean for you?
If your assets are over $166,707, you will have to make a full accommodation payment. You can do this as a RAD and pay the amount in full or choose a different form of payment which includes an interest component on top. (We’ll talk about that option in our next article.)
Because your family home is likely to be considered as part of your assets, you will need to make some decisions about whether to keep it or sell it.
We recommend talking with your family and your financial advisor to work out the best options for you.
Don’t forget that we can help ease your way through this emotional transition. You can speak to one of our specialist staff at any time. We make sure you get the right advice always. Just pick up the phone and call 1300 775 870 and let’s chat.
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