Moving into an Aged Care Home is often a confronting experience emotionally. In addition, there are the practical considerations and steps that need to be followed. One of the first questions you probably have is whether you need to sell the family home in order to cover the costs of aged care.
Aged Care Homes are mostly subsidised by the Commonwealth Government but they are still costly.
There are a number of ways in which you can pay the costs and fees and decide whether or not to sell the family home.
Below is an explanation but everyone’s situation is different and we recommend getting financial advice.
You may have already seen or heard these two acronyms if you’ve been looking into an Aged Care Home (also known as Nursing Homes or Aged Care facilities in Australia).
The Refundable Accommodation Deposit (RAD Aged Care), is an upfront bulk payment to cover the cost of your accommodation in an Aged Care Home. The RAD can be compared to buying a house – it’s the full payment of your property/accommodation and will be refunded once you leave the Home.
The price of the RAD is set by the Aged Care Home and much like any other property, it depends on the size, location and other amenities of the room. The cost of a RAD can range from $200,000 – $1.2 million.
The Daily Accommodation Payment can be likened to paying rent; it is a daily payment that covers the cost of your accommodation. The amount of the DAP Aged Care is based on what the RAD would be for that room + the maximum permissible interest rate (MPIR), and then divided by 365 to get a daily rate.
So, if the room cost is $400,000, and the MPIR is 8.15% (as at October 2023), the DAP will be $178.63 per day.
This is often the preferred option for those who wish to keep the family home, or who do not have a home to sell.
You can also pay a combination of the RAD and the DAP. You can choose to pay a partial amount of the full RAD cost and the remainder can be paid daily via a DAP. If the room cost is $400,000 you can choose to pay for example, $200,000 of this and pay the remainder as a DAP.
You have 28 days from the time you move into the Aged Care Home to decide whether you are going to pay as an upfront amount (the RAD) or as a rental payment (the DAP), or a combination of both.
If you choose to pay your accommodation fees as lump sum payment, you have 6 months to pay. For most people, if you do choose the payment option of a lump sum amount, it means selling the family home.
Aside from the accommodation costs, everyone who enters an Aged Care Home must also pay a Basic Daily Fee ($60.86) (September 2023) and those who can afford to (determined by a means test) also need to pay a Means Tested Care Fee. The amount of the Means Tested Care Fee is determined by the result of your Means test.
If the Aged Care Home has special amenities, or extras, there may also be fees to pay for these. These are called Additional Fees or Extras Fees.
Read more about Aged Care Home costs and fees.
Selling your home to pay your Aged Care costs can affect your pension. For example, if you sell your home for $1 million, and $600,000 of this goes towards your RAD, the remaining $400,000 will be counted in your assets test and may affect your pension.
It’s a big decision, and there are a lot of pieces involved so it’s a good idea to seek expert help from a Financial Advisor. Often, the sale of the family home involves more than one person, and there may be conflicting opinions and a lot of emotion attached to the decision. Getting help and practical advice from an impartial, third-party can help to steer the decision in the right direction for everyone.
Selling the family home is not the only option you have. As we mentioned above, you can choose to pay rental-style payments instead, or you can look at other alternatives like a reverse mortgage.
If you are looking for Aged Care Homes that suit the needs of your loved one, speak with one of our expert Aged Care Service Advisers.