When you move into residential aged care, the room price might be quoted as a lump sum, but you will have the choice to pay for your room as a lump sum or a daily fee or a combination.
In the same way that you can choose to buy or rent a home, so can you effectively choose to “buy” or “rent” your room in aged care. This choice can help with affordability if you don’t have enough assets to pay the full lump sum or don’t want to sell your assets. But there are a number of important things to consider.
If you pay a lump sum (called a refundable accommodation deposit – RAD) this is not lost money. The balance will be refunded to you or your estate when you leave, with repayment guaranteed by the Federal Government.
While you live in the aged care service, you are giving up access to your money and do not earn interest, but you will reduce the fees that you might otherwise have paid for renting the room. As interest rates increase, so may the benefits of paying the RAD. As a bonus, you might also qualify for additional age pension because the RAD is exempt for Centrelink and Veterans’ Affairs assets testing.
The decision whether to pay the lump sum or the daily fee is not an easy one and requires full analysis of your finances. You need to analyse the benefits and make sure you retain enough liquidity to meet your other ongoing expenses. Your estate plans and family situation may also impact which choice is better.
When making your choice, it is important to look beyond just the impacts when you enter care, but also what might change over time and what happens to your estate. Make your choice easier with advice. Contact us on 07 56 667 223 or email@example.com to arrange an appointment to discuss your situation.
Disclaimer: The information in this article is general and does not take into account your particular circumstances. We recommend specific tax or legal advice be sought before any action is taken.