Navigating aged care and the costs associated can be a nightmare. One of the biggest hurdles to face is coming up with the required Refundable Accommodation Deposit (RAD). To enter an aged care facility, usually a large sum is required and often, families want to pay their parent’s RAD to potentially prevent them having to sell the family home. And while this may seem like a solid solution, sometimes it can increase the resident’s fees.
What is the Refundable Accommodation Deposit?
Before we go too much further, let’s cover the basics of what the RAD or Refundable Accommodation Deposit actually is – the RAD is the standard room price set by an aged care facility. This is paid upfront and can be quite a significant investment.
As it’s means tested, any person requiring aged care may need to pay the full amount, or the Government may subsidise this fee, depending on the assessment. You can also choose to pay per day in a rental-style agreement, rather than all of it in one go. This is called the Daily Accommodation Payment or DAP – and this may also be subsidised by the Government to a degree.
There is also an option of using a combination of both a RAD and DAP. On top of that, you then have your basic daily fee (to cover the cost of your meals, cleaning, facility management etc.) and your means-tested care fee (a contribution towards your personal and clinical care) plus extra service and additional service fees.
You can find out more about how the fees all work in Nursing Home Costs Explained.
And we’ve also provided a more detailed explanation of the RAD in The Refundable Accomodation Deposit (RAD) explained.
You can also read more about fees on the government website here.
Keeping the family home
Often, an elderly person may not have much spare cash to pay for the RAD (In inner city areas, this could be one million dollars plus!). Which is where the question of selling the family home can come into play to afford the lump sum.
Concerned children of an elderly parent may therefore try to rustle up the extra funds needed for their parents’ care, to prevent them from having to sell a much-loved family home earlier than they would like – whether it be for financial reasons or emotional ties.
(Plus, the sale of the home may also push up the required aged care fees, which can jeopardise the pension.)
And while this may seem like a good idea to both the children and the parent (should these adult children be able to find the money between them) – sometimes it can make the overall financial scenario much worse.
This is because this extra money provided to the parent can make the parents financial situation appear much better than it is. This extra money will often be included in the means test and therefore they will then be assessed as being able to afford more of their care – driving the fees applicable up.
If you’ve been tossing up over whether or not to sell the family home, you may also like to read: “Do I need to sell the family home to pay for the Refundable Accommodation Deposit?”.
What Should I Do?
Specialist Aged Care Financial Planning is Critical
Income and assets means testing can be a complex issue to decipher. The right answers for you and your family are not always entirely black and white, and even small decisions can have massive long term financial and emotional consequences. Unfortunately, there is no simple answer. No two people and their circumstances are alike, and each individual scenario needs to be carefully evaluated to ensure the correct decisions are made as early as possible. To avoid any nasty hidden surprises, book in a consultation with Aged Care Specialists Victoria today, so you can get the right answers, upfront. We will go through every option, in detail so you walk away with everything you need to make a fully informed decision.