Aged Care Bond Refund On Death: How Much Do You Get Back?

When you make a large lump sum payment towards an aged care bond, it’s important to have some assurances that it will be refunded on death.

So, what are the rules concerning aged care refunds on death? Are you entitled to a full refund? What is the typical processing time?

Also, under what other circumstances might a bond refund be issued?

This article answers all of these questions, so that you can feel confident about how an aged care bond is refunded on death.

What Happens to Your Aged Care Bond (RAD) on Death?

If you pass away while residing in aged care, your bond, known as a Refundable Accommodation Deposit (RAD), is refunded to your Estate.

To receive the refund, the aged care home will need to be provided with either:

• Proof of probate of the deceased resident’s Will (official proving of the Will); or
• Letters of administration (estate administration of someone who has died without a Will).

In some cases, an aged care home will refund the RAD without the need to view these documents if they are confident of who the beneficiary is, but proof of documentation provides protection for the aged care home in ensuring they are making the payment to the correct party.

However, the amount of RAD refund you receive won’t always be equal to the initial contributions made towards the RAD.

How Much of Your RAD Do You Get Back?

The amount of aged care RAD refund you will receive upon death is equal to the total of the lump sum contributions made towards the RAD, minus any deductions.

Deductions may include where you have opted to have Daily Accommodation Payments (DAP) or Additional Services Fees (ASF) deducted from the RAD balance each month while residing in aged care, instead of paying for such costs from your personal bank account.

In some cases it’s possible that your RAD balance has depleted to nil as a result of aged care fees and charges being deducted from it.

Assuming a RAD balance remains, once the correct documentation has been provided to the aged care home and the RAD balance to be refunded has been calculated, the aged care facility has strict timeframes on when the RAD refund must be paid.

How Long Does it Take to Get My Bond Refund?

An aged care home is required to pay the RAD balance to a deceased resident’s Estate within 14-days of receiving proof of probate of the resident’s Will or letters of administration.

During this 14-day period, the aged care provider is required to pay interest on the RAD balance at a rate equal to the Base Interest Rate (BIR), which is 2.25% p.a. from 1 July 2020 and current as at 1 July 2024.

Should an aged care home not refund the RAD within the 14-day period, they will need to pay interest at a rate equal to the Maximum Permissible Interest Rate (MPIR), which is 8.36% p.a. as at 1 July 2024 – updated quarterly.

You can find details on the BIR and MPIR in the aged care Schedule of Fees and Charges.

Refundable Accommodation Deposits typically involve a substantial sum, meaning it’s crucial to know whether you risk receiving no refund at all or if your RAD is secure.

Is My RAD Guaranteed?

Your RAD is guaranteed by the Australian Government provided the aged care home you were residing in just prior to death was a Commonwealth Approved aged care facility.

Even if your aged care provider becomes bankrupt or insolvent and is unable to refund your RAD, the Australian Government guarantees to pay it back to you, including any interest owing.

What if you don’t pass away, but you decide to change aged care homes, instead? Will your RAD be refunded?

What Happens to Your RAD if You Change Aged Care Homes?

If you decide to change aged care homes, your existing aged care provider is required to refund your RAD.

To ensure you receive the refund in a timely manner, you should consider notifying your aged care provider of your intended departure sooner rather than later, due to the payment timeframes they are required to adhere to.

Specifically, an aged care provider is required to refund your RAD balance within 14-days of your notice to move to a different home. Therefore:

• Giving more than 14 days’ notice means your RAD must be refunded to you on the day you leave.
• Giving up to 14 days’ notice means your RAD must be refunded within 14 days of the day you gave notice.
• Giving no notice means your RAD must be refunded within 14 days after the day you leave.

Either way, planning such a move is important to ensure you have the funds available when you need them and that you don’t incur any unnecessary Daily Accommodation Payments.

Now that you know how a RAD is refunded on death, you can be better prepared for the documentation  you need to have ready, the amount you are likely to receive back and the timeframes on when it will be paid.

At Core Value Aged Care Advice we help you navigate the complexities of aged care and find the best financial solutions for your family. If you have any questions or concerns regarding your situation, please call us on 1300 944 011 to speak to an aged care expert.

Further Reading:

• Refundable Accommodation Deposit (RAD)
• Is It Better To Pay RAD or DAP for Aged Care?