Not everyone has to pay to enter residential aged care, but if you are like most people and have assets or income of some sort (whether that’s from investments, superannuation, or rent from your home), you will need to contribute toward the cost of your care.
One of the types of payments is a lump sum entry fee known as a Refundable Accommodation Deposit (RAD). This is separate to other daily fees that cover your care and living expenses.
Fortunately, there are different ways to pay the RAD, so you will be able to choose the option that’s right for you. You can pay by way of:
- A lump-sum called a Refundable Accommodation Deposit (RAD), or
- Regular payments called a Daily Accommodation Payment (DAP) instead of a lump sum, or
- A combination of both, depending on cash flow and assets which can be readily sold
What does all of this mean?
The Refundable Accommodation Deposit (RAD) is like an interest free loan to the aged care facility you will be entering, and is FULLY refundable to you (or your estate) when you leave.
Alternatively, choosing to pay your accommodation costs via a Daily Accommodation Payment (DAP) is like “renting” your room. If you are going to use this option, it’s very important to understand that any funds used to pay the Daily Accommodation Payment (DAP) are NOT refundable. This also results in higher daily fees when you combine the DAP with the Basic Daily Care Fee (and also potentially the Means-Tested Care Fee).
How does all of this work?
The good news is, you don’t have to decide how you are going to pay your accommodations costs straight away. The important points to be aware of are:
- Once you enter a facility, you have 28 days to decide how you are going to pay the RAD
- From the day you enter, you have 6 months to actually pay any lump sums, giving you time to sell down any assets (e.g. your home if applicable)
It is also important to note that you will pay the DAP from day one until the lump sums are paid.
Deciding on how you are going to pay your accommodation costs is a big decision, and if you get it wrong it could cost you a lot. It is important to seek advice early in the process so your Financial Adviser can analyse your situation and provide options allowing you to make the right decision based on your individual circumstances.