UNDERSTANDING THE REFUNDABLE ACCOMMODATION DEPOSIT

At Orange Financial Planning, we aim to ease some of the stress for our clients with the big life changes such as navigating a plan for retirement and aged care for themselves or their family members. It can be a complex process. The right professional advice can ensure a successful outcome without the headache.

A key concern for many navigating the entry to aged care can be understanding the refund rules for the Refundable Accommodation Deposit (RAD). Room prices in aged care are usually quoted as a lump sum. Often this is a big number, which can cause a lot of worry. Understanding these regulations may remove some of the stress and worry with a move into residential care.

It is important to realise that a RAD is not “lost” money. The amount you pay as a RAD is refundable when you leave care or pass away. If you pay a RAD, you will need to give up access to this money while you live in care, but it remains part of your wealth and is part of the inheritance that you can leave to your family.

HOW MUCH IS REFUNDABLE?

Your full RAD paid will be refundable when you leave care. The amount refunded is only reduced if you have asked (or allowed) the provider to deduct some of your ongoing care fees from your RAD, instead of paying these amounts from your bank account or other income sources. 

The rules were different before 1 July 2014, so you may have had experience with a family member who did not get all their money back in previous years. The rules are also different for retirement villages where you may lose a portion of your entry cost as a deferred management fee or refurbishment fee.

Under the current rules for residential aged care, if you pay your other fees in full each month, there will be nothing to deduct from the RAD and all the money paid is eventually refunded.

Example:

Danny moves into residential aged care with a room price of $700,000. He chooses to pay this as a lump sum. All of Danny’s other ongoing care fees are paid along the way from his bank account. When Danny passes away, the full $700,000 is refunded to his estate.

WHEN IS THE RAD REFUNDED?

The aged care provider needs to refund your RAD when you leave care or pass away. When you pass away, your executor may need to obtain probate and show a copy to the provider. The provider then has 14 days to pay the refund. If the provider does not require probate, they might have a cheque ready to pay the refund when your family come to collect your personal items.

MAKE AN APPOINTMENT TODAY!

Want to know more about RADs or aged care? Give us a call at Orange Financial Planning TODAY to see how we can help you with quality retirement and aged care advice. Kim Bryant is a Financial Planner with Orange Financial Planning who is Aged Care Accredited and holds a Masters FP, Grad Dip FP, and Assoc FPA

Tyron Mitchell

Contact us today on (02) 5310 4477 or drop us a line HERE!

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WHAT WE DO – RETIREMENT PLANNING                                       

WHAT WE DO – AGED CARE

Also check out our blog… PLANNING FOR AGED CARE – WITH EARLY PREPARATION AND GOOD ADVICE 

 

Mitchell Advice Pty Ltd ABN 44 625 356 872 t/as Orange Financial Planning is a Corporate Authorised Representative of Synchron AFS License No 243313. Unless specifically indicated, the information contained is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek personal advice from a financial adviser.