Aged care contracts often run to 50 or more pages, and on top of that there are Centrelink considerations to be worked through.
Paying for accommodation in aged care can occur in a number of different ways, and sometimes using a combination of options.
All residents pay a basic daily fee, but on top of that, depending on one’s financial position, there is the need to pay for accommodation.
Those who can afford the cost of an aged care room (usually in the $300,000 to $500,000 range) can choose to pay the whole accommodation cost, or some of the cost, by way of a refundable accommodation deposit (RAD).
The RAD is refundable at the end, and is government guaranteed.
An alternative is the payment of a daily accommodation payment (DAP).
It is the interplay of RADs and DAPs that can have significant financial consequences and that needs to be carefully considered.
A resident can pay a full RAD, part RAD and part DAP, or go fully DAP.
If paying a part RAD and part DAP – for example paying a RAD of $250,000 towards a $450,000 room cost – a decision needs to be made if the DAP is actually paid, or allowed to be drawn against the RAD.
In that circumstance the RAD may progressively reduce to nil over time.
The RAD payment is an exempt asset for Centrelink calculations, essentially as a principal place of residence, so the option to pay a full RAD rather than having those funds invested, with the flow-on detriment in terms of Centrelink payments, could be a sensible option depending on individual circumstances.
Sadly, at the end of the day people generally only leave aged care one way, so the RAD, or what remains of it, becomes an asset of the deceased estate, which will normally only be released by the aged care operator if probate or letters of administration are obtained.
Obtaining an understanding of the legal aspects of the aged care contract is important.
There are also very significant financial planning considerations involved. Any prospective aged care resident needs to get individually tailored advice from a financial planner who is expert in aged care.
Lesa Macpherson is an expert in aged care contracts at Sunshine Coast Elder Law. Call 1800 961 622 or visit sunshinecoastelderlaw.com.au or Brisbane Elder Law. Call 1800 961 622 or visit brisbaneelderlaw.com.au