Aged Care Bond Refund on Death
Aged care is a high cost and many people can't afford it. This is where a refundable accommodation deposit (RAD) can be helpful to those in need of aged care.
RAD's can be paid as a lump sum or monthly payments and are refunded on death to the family member who made the payment. Usually this will be a relative but it can also be refunded by the facility to the estate if the resident has died intestate. How the RAD works
The RAD refund on death is the process of returning the accommodation bond to the family estate of the deceased aged care resident. This can be done by the executor of their will, or by letters of administration if a valid will was not left.
The accommodation bond is a lump sum payment paid by the person who entered residential aged care. This can be paid as a full refund or as part of a daily accommodation payment (DAP). It is an alternative to paying the accommodation fee in cash, and it enables people to retain their assets whilst in aged care.
In many cases, it is difficult for people entering aged care to meet the accommodation fees. They エイジングケア may have little or no cash, or they have illiquid assets such as a house.
For this reason, many people who enter aged care are supported by their relatives by way of a RAD. This payment may be a valuable source of funds to enable them to pay for their accommodation in aged care and may allow them to remain in their preferred accommodation.
However, this is not without its risks and considerations need to be given to the age pension and social security means tests. If a person pays their accommodation through a RAD, it may be treated as an asset for Age Pension purposes and it is possible that their age pension could be reduced. If a person uses borrowed funds to pay their RAD, this can lead to a reduction in the amount of the Age Pension paid.
Alternatively, if a RAD is paid as a DAP, it will not be treated as an asset for Age Pension purposes. It is also possible that the person will be able to borrow money through a reverse mortgage or an accommodation bond loan.
It is also important to consider whether the person is disadvantaged by their decision to pay their aged care fees through a RAD. For example, if their aged care fees are a significant percentage of their income then they will not be able to afford to borrow the money required to pay for their RAD and this could lead to a reduction in their Age Pension. How the RAD is refunded
If a resident dies in residential aged care, the amount of their accommodation bond will need to be refunded to their estate. This refund is important to aged care providers, as it will be used to pay for future services. It is also an important benefit for a deceased estate to receive, as it will provide the aged care recipient with more money to spend on living expenses.
It is a good idea to consult with financial care specialists when placing a loved one in aged care. The early advice about residential aged care fees and payment options could save a family from distress later.
When considering whether to pay for accommodation by a RAD or daily accommodation payment (DAP), it is important to consider the impact on social security and aged care means tests. It is not always easy to decide what is the best approach to take, as a RAD can be more expensive than a DAP and will increase the daily means-tested care fee.
A RAD can be paid as a lump sum or on monthly basis, depending on the resident’s circumstances. Residents can negotiate with their provider on the RAD they pay and can even negotiate it to be less than the original amount paid.
The RAD is a type of unsecured loan. This means it has no interest rate attached to it, but it is not repaid until the resident dies.
If a RAD is paid using borrowed funds, it will not count in the asset test for Age Pension purposes. It will still count when calculating the daily aged care means-tested care fee, however.
Many people are concerned about the effect of paying a RAD on their Age Pension payments. If it is a large RAD, then this can lead to an increase in a person’s Age Pension payments.
Another consideration is the cost of borrowing money to pay for the RAD or DAP. The cost of a RAD is typically much higher than a DAP, so it may be cheaper to pay for the RAD with a DAP rather than borrow money for it. When the RAD is refunded
Aged care is a complex financial transaction. There are fees and costs involved that can be confusing for residents and their families. This is particularly the case when it comes to paying for accommodation in an aged care home.
One of the most misunderstood areas is how accommodation payments – known as refundable accommodation deposits (RADs) – work. It’s important to understand that RADs are not “lost” money, as they are fully refunded when you leave care or die.
During your stay, you can choose to pay your RAD in full or in instalments. Alternatively, you can choose to pay a daily accommodation payment (DAP).
A resident who pays their RAD in instalments or as part of a DAP can expect to pay interest on the unpaid amount at a government-set rate called the Maximum Permissible Interest Rate (MPIR). This MPIR is reviewed by the Australian Government each quarter and is fixed on the day a resident signs their aged care agreement.
You must give at least 14 days notice if you are planning to move rooms in an aged care facility. This allows time to find another home that accepts the RAD or a refund of the RAD.
The RAD must be refunded to the estate when a resident passes away, within 14 days of receiving a Grant of Probate or Letters of Administration from the court. The aged care facility will also have to pay a base interest rate plus a higher rate if the RAD is not refunded within the timeframes set out by the Aged Care Act 1997.
As an alternative, some operators may offer residents the option of paying a lump sum to cover their accommodation. This is usually paid out as a RAD or DAP combination – effectively “buying” accommodation in an aged care home.
If you are considering using a RAD to cover your accommodation, make sure that the aged care facility you are choosing to stay in has the required certificates and approvals. This will help ensure that you receive the best possible care when living in a residential aged care home. What happens if the RAD is not refunded
A large percentage of residents moving into aged care pay lump sum accommodation bonds (RAD). These bonds are refunded to the deceased’s estate within 14 days of death, less the retention amount.
This is a great thing for elderly people, and their families, but it is not without its problems. A RAD refund is one thing, but there is also a lot of interest that needs to be paid to the aged care facility as well as an additional penalty for the provider if it doesn’t repay the money on time.
Currently there is a 3.75 per cent base rate that must be paid to the facility and a much higher 4.95% maximum permissible interest rate on the refundable amount. That means the old fashioned RAD can be difficult to make work financially for aged care operators.
It’s also important to remember that this rate is only applied to the refunded amount, not the original deposit that was used to pay it in the first place. This could lead to an age care facility losing a significant amount of cash and possibly paying out the RAD to a beneficiary that might not have been the best person for the job.
The best way to avoid the pitfalls is to get a proper aged care financial planner that specialises in this area, and who can also advise you on the other relevant facts and figures. This will help you decide if selling the family home to pay an aged care bond is actually the right move for you. The right aged care financial adviser will also be able to tell you the best ways of getting the most money back from your RAD, and other fees and charges. If you would like to have a chat about the aged care bond, or any other matters that you may have, then feel free to get in touch with us today.