If a loved one is moving into a nursing home, they may have to pay for a Refundable Accommodation deposit (RAD). The RAD will typically range between $300k and $500k. For many who want to pay for the RAD, selling the family home maybe the only option. In this blog, we look at things you should know and consider before and when going down this path.
Decide if and how much of the RAD will be paid
Your loved one does not have to pay the entire RAD as a lump sum. They can choose to pay 100% of the RAD, or as 100% as a Daily Accommodation Payment (DAP), or a combination of both. The DAP
You may find that you may have sufficient cash to pay for a combination of the RAD and cash flow to pay for the DAP.
The RAD is refundable payment and the DAP is not.
Remember, you have 28 days from the day your loved one moves into the home to decide which payment method you prefer. So there is time to see a financial planner to review your options.
Do you really want to keep the family home?
For obvious reasons, the family home has an emotional attachment to many families. For some, keeping the family home is a must even if doesn’t make the most financial sense. For others, keeping the family home is not possible even if they don’t need to sell it to fund the RAD.
Other factors to consider when deciding what to do with the family home
Assuming that there is no spouse or other family dependent will be living in the family home. Basically the option for the family home is between selling vs renting vs leaving it vacant. Other factors to think about:
Ability to Rent: Can the home be rented out? How much will you get from the rent?
Costs to Maintain or Sell: Is there sufficient funds to maintain and repair the home to be rented out.
Effect on Care Fees: The value of the family home is only assessed for a certain limit. Selling the home may increases care fees, eg. for the Means-Tested Fee as more of the assets is assessed.
Impact on Centrelink: The family home is exempt from the assets test for age pension purposes. Selling the home may mean more of the assets are assessed. This may result in a lower age pension.
Alternative Funding: Do you have other assets that can be used to pay for the RAD, eg. shares, super fund. You might even consider looking into a reverse mortgage.
Need to access equity: Not just to pay for the RAD, but also need to have the cash flow to pay for other care fees and lifestyle fees.
In the end of the day, the decision on what to do with the family home often comes down to emotional and practical reasons, as opposed to financial reasons. It is something that your parents and the family have to discuss. It is still wise to see a financial planner to help assess the financial impact and implications of such decisions.
At Futura Financial Group, we specialise in aged care advice. Our professional financial planners not only can provide aged care financial advice that will help with cash flow and minimise aged care costs.
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Disclaimer: Information on this site may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product. Rates are current to 19th March 2018.
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