Aged Care Bond Refund on Death

Posted by seoexpert131 on June 3rd, 2023

Many people have to make big financial decisions when moving into aged care. Amongst these are whether to pay a RAD or a DAP.

If a person dies before their RAD, or Bond, is refunded the aged care facility can only refund it to the deceased persons estate. However, delays in submitting the Will for Probate can prolong the wait for the aged care facility to refund the Bond.
Obtaining a Grant of Representation

When a person enters aged care, they can choose to pay their accommodation costs via a Refundable Accommodation Deposit (RAD) or Daily Accommodation Payment (DAP). Previously accommodation bonds were used but since July 1, 2014 changes have been made in relation to the way that residents are able to pay for their accommodation. RADs are now the preferred method of payment as they offer better value for money and are fully refundable to the estate upon leaving the residence.

A RAD is a lump sum amount that is paid to the aged care home when a person moves in and it works much like a loan, allowing the aged care home to invest the lump sum and earn interest. The RAD will also be refunded when a person leaves the aged care facility but there are some time limits that need to be followed and base interest rate charges apply.

For a RAD to be refunded a Grant of Representation must be obtained or the estate must be established (probate or Letters of Administration – where there is no Will). This can be a lengthy process especially if disputes arise or probate takes longer than anticipated. The longer the RAD is held by the aged care home, the more interest will be charged.

If family members put up the RAD and it is refunded to the estate of the deceased, the family will receive the interest at the base rate plus the Maximum Permissible Interest Rate (MPIR). The MPIR is reviewed each quarter.

If a person is entering aged care, it can be an expensive decision. They will need to consider selling their own property and if they don’t have enough funds then it may mean that they need to borrow money from other family members or friends. Alternatively, the elderly person may have to downsize their house and give up possessions that hold huge sentimental value. There are also additional fees for extra services which can add up to a considerable amount of money. It is important to seek expert financial advice from a specialised aged care planner before making any big decisions such as selling the house.
Obtaining a Will

The biggest reason that people come to us at Hicks Oakley Chessell Williams is to help them release their refundable accommodation deposit (RAD) from an aged care facility. The RAD is paid upfront by families on behalf of their elderly loved ones who go into residential aged care. It is a substantial sum of money & the Aged Care Act states that it must be refunded within 14 days from the grant of probate or letters of administration in the case of someone who died intestate. エイジングケアを学ぶ情報サイト

The problem is that if the RAD is not paid back in this time frame then it becomes part of the estate to be distributed under the Will. If there is no Will & the informal 'loan' of cash to pay the RAD has not been recorded then it could be difficult for the family to prove that it was a gift & not a loan & thus that the RAD should be refunded.

In order to prevent this a Will needs to be prepared ideally well before any person goes into residential aged care. This will need to be reviewed & replaced regularly especially when any changes in circumstances occur.

One of the most important aspects of a Will is to appoint a trustworthy, reliable person as executor to handle the estate after death. The best choice for this role is a spouse, child or relative that you trust. This person should be willing to take on the responsibility & be capable of handling large sums of money.

It is also essential that a power of attorney is registered for the person concerned before they go into residential aged care, in the event that they lose mental capacity through a stroke or dementia. A POA is a very simple thing to organise (any solicitor can do it for you) & yet many people don't get around to doing it until it is too late.

The other essential step is to obtain proper financial advice from a specialist in this area. This is a crucial element because the fees & charges for residential aged care can be quite high & many families are not aware that there are different options available to them.
Obtaining a Letter of Administration

The cost of aged care accommodation can be quite expensive, especially in Melbourne and Sydney. To help residents afford the costs they have to pay a lump sum Refundable Accommodation Deposit (RAD) or Daily Accommodation Payment (DAP). RADs work much like an interest-free loan and are fully refundable on leaving an aged care home. However, aged care homes are not allowed to make deductions from a RAD during a resident’s stay and must fully return it within 14 days of the person leaving their service. In addition, the Australian government guarantees that a refund of a RAD will be paid to a resident’s estate if an aged care home fails for any reason to do so.

Often family members will lend money to their loved ones who are moving into aged care to help them with the costs. This is often done because there may be a lack of funds in the resident’s own account or they may wish to avoid selling off their assets. In some cases, a RAD will be paid out of a loan that has been secured against the family member’s home or other assets. If this is the case, a letter of administration needs to be obtained from the Probate court in order for the facility to be able to return the money once the deceased has died.

A refunded RAD will be returned to the deceased’s estate and distributed according to their Will. If the deceased had no Will, the refunded RAD will be distributed according to the rules of intestacy. As such, delays in obtaining a Grant of Probate or settling disputes could prolong the wait for the RAD to be refunded.

Most aged care homes will ask a family member or enduring power of attorney to sign a personal guarantee for the fees that are to be paid for the resident. This is usually only asked of one family member who has done most of the work for a loved one to move into aged care, because other family members are either too busy or not interested in taking part. It is important to seek legal advice before signing a personal guarantee for aged care fees, as it can have significant tax implications if not managed correctly.
Obtaining a Death Certificate

Obtaining a death certificate is an essential process in many cases. This is particularly true if an estate is being administered. Generally, only those who have a legal right to the record can order it. This includes the spouse, parents or children of the deceased, as well as anyone with a lawful interest in her property. This interest may include a desire to enforce a law or protect personal property.

An aged care home (nursing home) is required to refund the lump sum balance of a deceased resident’s accommodation deposit (RAD) or bond within 14 days of being shown evidence of probate or letters of administration. They are also required to pay interest on the lump sum amount until it is refunded at the maximum permissible rate.

Hicks Oakley Chesell Williams Lawyers can assist with obtaining a Grant of Representation, which will enable the RAD to be refunded. This can be obtained relatively quickly if the estate is straight forward, & will only take about 4-6 weeks.

Often, a family will choose to stay in the house rather than sell it because of its sentimental value or the fact that they have mortgaged it to pay for age care. This is usually not financially wise, and it is important to seek specialist advice on this issue. An experienced financial planner can structure a property settlement that will maximise the refunded RAD & avoid interest charges on the loan. They can also help negotiate fees on behalf of the deceased’s estate. These can sometimes be waived or reduced by the aged care facility. This can save families a lot of money. In addition, a financial planner can help to ensure that the RAD is returned to the estate with as little tax payable as possible.

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