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How to deal with a Refundable Accommodation Deposit (RAD) after death

by | Sep 16, 2024 | Wills & Estates

We are all aware that our population is aging and as a result, more people are living in residential aged care facilities.  On entry to a facility, the accommodation provider and the resident enter into a Residential Care or Management Agreement and often a resident is required to pay a Refundable Accommodation Deposit (RAD).

The RAD is an upfront payment made by the resident and upon leaving the facility or upon their death, is refundable less any permissible deductions such as fees or care costs.  The RAD is a significant amount of money and is regulated through the Aged Care Act 1997 (Cth) (‘the Act’).

How to have the RAD refunded

After the death of a resident, the process (as prescribed by the Act) for the refund of the RAD is as follows::

  1. The residential provider must refund the RAD when the resident dies to the resident’s estate;
  2. The RAD must be paid to the estate within 14 days of obtaining a copy of the Grant of Probate or Letters of Administration relating to the resident’s estate;
  3. Until the RAD is refunded to the estate, the RAD will accrue interest at a rate rate is fixed by regulation.
What is the interest rate?

 There are two interest rates when it comes to a RAD being:

  • The base interest rate (BIR) which applies from the day after the resident died, until the end of the legislated 14-day refund period from the Grant being received; and
  • The maximum permissible interest rate (MPIR) which applies from the day after the end of that 14-day period until the provider completes the refund (should it be longer than the 14-day period).
What should an executor or administrator of an estate do?

As an executor or administrator, one of the first steps you must do is ascertain the assets of the deceased estate.  This involves contacting the residential provider to obtain the RAD amount and any requirements they may have for the refund to be processed, other than the Grant being provided.

How is the RAD paid?

Depending on the provider and the executor or administrator, the RAD will be refunded either by cheque payable to the resident’s estate or, can be transferred to the estate’s bank account or the trust account of the law firm assisting the executor or administrator.

What happens if the RAD cannot be refunded by the facility?

Unfortunately there have been occasions when a facility has not been able to refund a RAD whether it be due to a bankruptcy or insolvency.  In these instances, the Accommodation Payment Guarantee Scheme has been established to cover all residents of Australia government-subsidised aged care services who have paid a lump sum RAD.  This scheme will ensure the refund of the RAD together with any interest prescribed.

How can Nevett Ford help?

Our Wills and Estates Team works with executors and administrators through the entire estate administration process to ensure that all assets are obtained and the estate distributed accordingly.  For more information or if you require any assistance, please contact us on +613 9614 7111 or email us at melbourne@nevettford.com.au.