When a person enters residential aged care in Australia, their financial situation can change significantly. Understanding RADs and aged care is an important part of planning for this transition. One of the biggest factors is the Refundable Accommodation Deposit (RAD), which can involve hundreds of thousands of dollars.
Many families do not realise that RADs and aged care costs can affect estate planning, asset distribution, and inheritance. Decisions about how accommodation is funded may impact what assets remain in the estate and how easily those assets can be distributed after death.
Understanding how RADs and aged care costs interact with estate planning is important for protecting your legacy and ensuring your wishes are carried out.
This article explains how RADs and aged care costs work, how they affect assets, and why reviewing an estate plan before or after entering aged care is an essential step.
What Are RADs and Aged Care Accommodation Costs?
A Refundable Accommodation Deposit (RAD) is a lump sum payment made to an aged care provider for accommodation in residential care and is one of the most important financial considerations when it comes to RADs and aged care.
Instead of paying the full accommodation cost through ongoing daily payments, many residents choose to pay part or all of the amount as a RAD. Understanding the role of RADs and aged care can help families make informed decisions about how these accommodation costs are funded.
Key features of RADs and aged care accommodation payments include:
• A RAD is a lump sum payment that secures accommodation in aged care.
• The amount can range from tens of thousands to over $1 million depending on the facility.
• The RAD is refundable when the resident leaves the facility or passes away, minus any agreed deductions.
Although the deposit is refundable, the funds may be tied up for years. This can have a significant impact on the person’s financial position and estate planning.
For more details about how aged care accommodation payments work, see the Australian Government guidance on residential aged care costs:
https://www.myagedcare.gov.au/how-much-will-i-pay
How RAD Payments Affect Assets in an Estate
One of the most important estate planning considerations is that a RAD is usually paid using existing assets.
Common sources of RAD payments include:
- Selling the family home
- Using savings or investments
- Borrowing against assets
- Family contributions
Because of this, entering aged care often changes the structure of a person’s assets.
For example:
If a person sells their home to pay a RAD, the property may no longer form part of the estate. Instead, the estate may consist of a refundable deposit held by the aged care provider.
This change can affect:
- The value of the estate
- How assets are distributed under the will
- The expectations of beneficiaries
While the RAD is refundable, it is not immediately accessible during the person’s lifetime. This can limit liquidity and create complications if other financial needs arise.
Why Estate Plans Should Be Reviewed Before Entering Aged Care
Many people create a will years before they enter aged care. By the time care is required, their financial circumstances may be very different.
Entering aged care is a major life transition that often triggers the need for an estate plan review.
Some common reasons include:
Changes to asset structure
Selling property or using savings to pay a RAD can change the composition of the estate.
A will written years earlier may refer to specific assets that no longer exist.
Updated financial priorities
People entering aged care may want to prioritise certain beneficiaries, protect assets for family members, or provide support for a spouse.
Tax and financial planning considerations
Aged care decisions can affect income, investments, and long term financial planning. These factors may also affect how the estate should be structured.
Ensuring documents still reflect current wishes
Over time, relationships and family circumstances change. Reviewing estate documents ensures they still reflect the person’s intentions.
Reviewing an Estate Plan After Entering Aged Care
Even if someone has already entered residential aged care, it is still possible and often advisable to review their estate plan.
Several documents may need to be updated.
The will
A will should accurately reflect the current asset pool.
If assets have been sold or converted into a RAD, the will may need to be adjusted so that it distributes the estate effectively.
Powers of attorney
Entering aged care often means that family members or trusted individuals may need to assist with financial or personal decisions.
Ensuring that enduring powers of attorney are in place can help manage financial matters if the person loses capacity.
Guardianship or medical decision documents
Advance care planning documents can ensure medical decisions align with the person’s wishes.
The Process of Reviewing an Estate Plan When Entering Aged Care
A structured review can help ensure all relevant issues are addressed.
A typical process may involve:
1. Reviewing current estate documents
This includes examining the existing will, powers of attorney, and any estate planning structures.
2. Assessing the current asset position
A full review of assets may include:
- Property
- Savings and investments
- Superannuation
- RAD payments
- Debts or liabilities
3. Understanding aged care costs
Accommodation deposits, daily payments, and other care costs can affect available assets.
4. Updating legal documents
Based on the updated financial situation, the will and related documents may be amended.
5. Coordinating with financial advisers
Estate planning often works best when legal and financial advice are aligned.
What Can Go Wrong If Estate Plans Are Not Updated
Failing to review an estate plan after entering aged care can lead to several complications.
Assets referenced in the will may no longer exist
If a will leaves a specific property to a beneficiary but that property was sold to pay a RAD, the intended gift may fail.
Unexpected disputes between beneficiaries
Changes in asset values or asset types can lead to misunderstandings among family members.
Delays in estate administration
If the estate contains a RAD refund, executors may need to deal with aged care providers to recover the funds.
This process can take time and delay the distribution of the estate.
Increased stress for families
During an already difficult time, unclear estate planning can add unnecessary complexity and emotional strain.
How RAD Refunds Work After Death
When a resident passes away, the aged care provider must refund the RAD to the estate.
Generally:
- The provider must refund the RAD within 14 days after receiving probate or letters of administration.
- Any outstanding fees may be deducted from the amount.
The refund becomes part of the deceased person’s estate and is distributed according to their will or the rules of intestacy if no will exists.
This is another reason why it is important that estate planning documents accurately reflect the person’s financial situation.
Frequently Asked Questions
What happens to a RAD when someone dies?
A RAD is refundable to the estate when the resident leaves aged care or passes away. The aged care provider must usually return the deposit within 14 days after receiving probate or letters of administration.
Does paying a RAD reduce inheritance?
It can. While the RAD itself is refundable, the assets used to fund it may have changed the structure of the estate. For example, selling a property to pay the RAD may affect what beneficiaries ultimately receive.
Should a will be updated when entering aged care?
Yes. Entering aged care often involves major financial changes. Reviewing a will ensures that estate plans still reflect the person’s assets and intentions.
Can the family home be kept instead of paying a RAD?
Sometimes. Some people choose to pay accommodation costs through daily payments rather than a lump sum RAD. However, this depends on financial circumstances and should be considered alongside estate planning advice.
Protecting Your Legacy Through Proactive Estate Planning
Entering aged care is often an emotional and complex transition. Alongside healthcare decisions, it also raises important legal and financial questions.
RAD payments, accommodation costs, and asset restructuring can all affect the eventual distribution of an estate.
Reviewing estate planning documents before or after entering aged care can help ensure:
- Assets are structured appropriately
- Beneficiaries receive what was intended
- Legal documents reflect current circumstances
- Families experience fewer disputes or delays
Taking proactive steps can provide clarity and peace of mind for both the individual and their loved ones.
Disclaimer
This article provides general information about aged care costs and estate planning in Australia. It does not constitute legal advice. Every person’s circumstances are different, and professional advice should be obtained before making decisions about estate planning or aged care arrangements.