Up until recently, anyone going into aged care would pay a bond for their accommodation, as tenants do when renting a home. Today, instead a Refundable Accommodation Deposit (RAD) is required, at a price set by the aged care facility.
It’s called a Refundable Accommodation Deposit because the lump sum paid is fully refundable when the resident leaves the aged care facility. It’s like making a loan to the facility which is repaid at the end of tenancy.
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Is a Refundable Accommodation Deposit the only way to pay for aged care?
A Refundable Accommodation Deposit is not the only form of payment - there is also a Daily Accommodation Payment (DAP). Rather than a lump sum payment like the RAD, the DAP is a daily payment which can be made on a regular basis.
You can choose to pay a combination of a RAD and a DAP for your accommodation costs. For example, you could pay half as the RAD, then pay the rest as a smaller daily payment as the DAP.
What happens when a loved one passes away in aged care?
If your loved one passes away in aged care, the Refundable Accommodation Deposit will only be accessible after the probate or letters of administration process is underway.
The aged care is required to pay back the RAD within 14 days of sighting evidence of probate or letters of administration process. So you will need to provide probate or letters of administration to the aged care facility.
The aged care can refund the RAD without proof of these documents if they choose to, but only if they’re confident that the correct legal executor, next of kin and beneficiaries have been identified.
It’s important to note that probate or letters of administration can take from 4-6 weeks for a relatively straightforward estate.
The reason for this process is so the RAD is paid to the correct person, so the executor or next of kin who is then responsible for distributing the funds as necessary.
Does interest get paid on the refund?
During the 14-day refund period, the aged care home will pay you interest on your RAD at the base interest rate.
No interest is earned on your RAD while the person in aged care is still receiving care.
If the home takes longer than 14 days to refund RAD, they will have to pay interest at a higher rate, the maximum permissible interest rate.
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