As our population ages, more people are being accommodated in supported residential aged care. On entry, the aged care provider and the resident sign a residential care agreement which often requires a payment known as a Refundable Accommodation Deposit (RAD) to secure that accommodation.

The RAD is a significant amount of money and is regulated by provisions in the Aged Care Act 1997 (Cth) (the Act).

STEPS TO RECOVER THE RAD

The general process (as prescribed by the Act) is as follows::

1. The aged care provider must refund the RAD when the resident dies.
2. The refund is paid to the resident’s estate.
3. The aged care provider must refund the RAD within 14 days of sighting the grant of probate or letters of administration pertaining to the resident’s estate.
4. Until the RAD is refunded to the resident’s estate, the aged care provider must pay interest.
5. The interest rate is fixed by regulation.
6. Two rates are applicable:
   • The base interest rate (BIR) which applies from the day after the resident died, until the end of the legislated 14-day refund period. The current rate is 2.25%.
   • The maximum permissible interest rate (MPIR) which applies from the day after the end of that 14-day period until the aged care provider completes the refund. The current rate is 8.34%.

The first step in reclaiming a RAD after the resident’s death is to find out from the aged care provider the process they follow and any documents which they require in addition to the grant of probate or letters of administration.

The refund is paid either by cheque drawn in favour of the resident’s estate or by electronic transfer to a bank account in the name of the estate or to the trust account of the solicitors handing the resident’s estate.

Throughout the process, maintaining open communication with the aged care home is essential. They can provide guidance and assistance as needed and keep you informed of any updates or developments.

WHAT HAPPENS IF THE RESIDENT DIES WITHOUT A WILL?

The refund must be paid to the administrator of the resident’s estate. The administrator is usually the resident’s closest next of kin and the refund must be paid when the aged care provider receives the grant of letters of administration issued to that person.

WHAT HAPPENS IF THE AGED CARE PROVIDER CANNOT REFUND THE RAD?

The Accommodation Payment Guarantee Scheme covers all residents of Australian Government-subsidised aged care services who have paid a lump sum. If the aged care provider becomes bankrupt or insolvent and cannot pay the refund, the Australian Government guarantees to pay it back with the prescribed interest.