Residential Aged Care – FAQs
An entry to residential aged care can be a daunting, complex and difficult process. In addition to the often unexpected changes to health and lifestyle, there is a complex and interrelated set of legislation to be navigated and significant decisions to be made.
A key part of my day to day work is to provide comprehensive advice to help clients navigate these complexities. In this article I answer some of the frequently asked questions raised by our clients.
Can family members help to pay a Refundable Accommodation Deposit (RAD)?
Yes, but with great caution and often for limited benefit.
Any amount paid towards a RAD is included as an assessable asset when calculating costs of care. While making payment of a RAD on behalf of a family member will reduce their Daily Accommodation Payments, it will also lead to an increase in their means tested fee.
Another issue that arises is a RAD is an individually held estate asset, held in the name of a care recipient. In the event of a care recipients death, funds are distributed in accordance with the provisions of their Will. This does not always direct funds back in even proportion to family members that have contributed to the RAD. Great care should be taken, and legal advice sought, before making any payment towards an RAD on behalf of a family member. Often the additional cost and complexity involved negates any overall benefit.
Is the contribution towards a RAD guaranteed?
Yes, RAD’s are government guaranteed in full. In the event the care facility becomes insolvent, the government will refund contributions made to a RAD in full. There is no upper limit to this government guarantee.
Can money or assets be gifted, prior to entering residential aged care?
Any assets given away or sold for less than market value will be assessed by Centrelink in the ordinary way for gifting provisions in a residential aged care scenario. That is to say, any gift that exceeds $10,000 per financial year or $30,000 over five financial years will be recorded as a ‘deprived asset’ on Centrelink’s ledger, and will remain assessable for 5 years against pension payments and costs of care.
Do I have to sell my home after entering residential aged care?
There is never a compulsion to sell the home. The former home is however of course a significant asset, and so the decision to retain or sell will have a material impact on overall financial outcomes.
But isn’t my home exempt for Centrelink purposes?
There are effectively two concurrent means tests conducted by Centrelink in a residential aged care scenario, one relating to pension payments and one relating to costs of care.
For pension payments, a vacant former home remains exempt for up to two years after entry to care. After this point, the former home becomes an assessable asset at full market value.
In calculating costs of care, a vacant former home is assessable up to a capped value only (currently $171,535.20). The capped value is assessed indefinitely against costs of care, unless and until the former home is sold, at which point proceeds are assessed in full.
Does the rate of interest charged on unpaid amounts of a RAD change?
The rate of interest charged in relation to unpaid amounts of a RAD (known as the Maximum Permissible Interest Rate, or MPIR) is set at the point of entry to care. While the published rate of the MPIR will change periodically, it is set for an individual receiving care, at the point of entry to care, for the duration of care.
I have heard a couple should move into care on separate days, why is that?
The relevance of a couple entering care on separate days is often misunderstood. The benefit, if any, relates to the assessment of the capped value of the former home.
If one member of a couple enters care a day before their spouse, the capped value of the former home (explained above) would be exempt for the first day of care only, for the first member of the couple to enter care only. This can be a useful provision if it allows one member of a couple to be assessed as a ‘concessional resident’. However, somewhat ironically, a concessional assessment does not always lead to a reduction in overall costs.
Whether an entry to care on separate days should be arranged depends entirely on circumstances, and should not be arranged without due consideration of broader impacts.
The above questions and answers demonstrate the complexity of our aged care system. We are experts in optimising finances and managing the costs of aged care for our clients. If you or a loved one are considering a move into residential aged care, I encourage you to contact us to discuss.