Navigating aged care can certainly be a complex process of juggling both finances and delicate emotions. And one of the biggest hurdles to face is coming up with the required Refundable Accommodation Deposit (RAD) to enter an aged care facility.
More often than not, an elderly person seeking care is required to sell the family home in order to pay this deposit. However, this clearly comes with some massive emotional consequences when the entire family is very much attached to that house.
The temptation for adult children, supporting their parent/s, therefore is to try to come up with the deposit amount among themselves to pay the RAD, so they can retain their family home for longer. 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, lets cover the basics of what the RAD or Refundable Accommodation Deposit actually is.
Basically, 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.
Keeping the family home
Often, an elderly person may not have much spare cash to pay for the RAD. 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?”.
Specialist Aged Care Financial Planning is Critical
As this article demonstrates, 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.
While there may appear to be a simple answer in front of you, the complex aged care rules and regulations may well leave you and your parent, and loved ones, in a worse situation than before.
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.
That way, you’ll avoid any nasty hidden surprises, or making a life-altering decision that wasn’t necessary, when it’s all too late.
Make sure you book in your free phone consultation with Aged Care Specialists Victoria today, so you can get the right answers, upfront.