Recently we received a query on our agedcare101 forum from a woman who had loaned money to her mother to pay for her Refundable Accommodation Deposit (RAD) – the main fee you pay for aged care.
Even though the family had a mortgage document stating that the money was a loan, the Department of Human Services said it was still considered to be part of the mother’s assets – and her basic daily fee, which is mean-tested based on your income, went up accordingly.
It seems unfair – but the fact is when it is paid, the RAD becomes the resident’s asset – and it is assessable for the daily fee.
While some families have successfully argued that a loan should not be counted as an asset, they had to take their cases to the Administrative Appeals Tribunal of Australia (AAT) – a time-consuming and stressful exercise.
For us, it yet again highlights how complex the finances around aged care are – and how important it is to seek the right advice.
Specialist advice worth the investment
With the average RAD now around $350,000, rising from $500,000 to well over $1 million in the capital cities, a specialist aged care adviser can help if you are looking to provide considerable financial assistance to parents.
This can include advice on whether it would be better to pay a RAD in full or as a Daily Accommodation Payment (DAP) or a combination of the two as well as issues such as selling the family home, impact on pensions, aged care loan products and using the Government’s Pension Loans Scheme.
Placing a parent into aged care is a tough time – both emotionally and financially. As one of the commenters says: “What a pity it is that one’s last days with a loved one might be spent trying to fathom the depths of such matters.”
Seeing a specialist adviser is not cheap. We estimate it will cost a minimum of $1,000 and likely more. But it’s an investment that can save you a lot of money – and stress – in the long run.
You can find more information about choosing a financial adviser here.
Discussion1 Comment
In Oct 2016, Minister Ley, “on the advice of the Department and without consultation”, amended the means testing assessment so that any monies borrowed and contributed as a lump sum would be asset tested, without the allowance of a liability to offset the asset.
The then Minister failed to consider how all other aspects of the asset/liability considerations of either Government/business/personal circumstances always allowed a liability to be offset against the asset.
The current Minister has also been consulted but has failed to take any reverse action.
Pity the poor consumer.
So if you need a loan to pay for care, either as an aged care loan or borrowings from family, just take enough to pay daily.
Although aged care providers will not like this option, 40% of all ingoing residents now pay daily and 22% pay a combination of lump sum and daily.
It is forecast that within 5-7 years everyone will pay daily, which means government will have less means testing revenue.