Entry to permanent Aged Care often involves considerable impact on the structure, composition, diversification of assets and the future value of a person’s estate.
Money used to pay towards the RAD ceases to be able to grow in value.
On the other-hand, money paid to the RAD reduces what is paid monthly towards the DAP.
Money paid into the RAD is not regarded as a financial asset for Centrelink/DVA asset test purposes, but it is an asset in the calculation of one's Means Tested Fee (MTF) for Aged Care purposes.
What is the better option?
Furthermore the current value of money paid into the RAD is returned directly to the estate upon the death of the resident but prior to entry to permanent Aged Care that money, or perhaps an asset sold to release that money, may have been earmarked for a specific purpose or beneficiary.
This can cause major conflict between the terms of the Will and the actual composition of assets available for distribution.
A useful example is this; suppose a Will specifies that a property is designated to go to beneficiary ’A’ and the balance of the estate is to be shared amongst 4 other beneficiaries. If the property is sold to pay money towards the RAD and later the resident dies the RAD is paid back to the estate. As there is now no property to pass to ‘A’ all of the money would be shared by the other 4 beneficiaries.
This example highlights the need for a review of the Will of elderly family members before they lose the legal capacity to make a new Will that can allow for issues related to the possibility of entry to permanent aged care. It also highlights the need of drawing any specific asset linked bequests in a Will to the attention of your aged care financial advisor.
We would warn against the use of ‘over the counter’ pre-formed Will packages. We strongly urge that any Will be prepared by a competent solicitor, preferably one that specialises in Wills, Probate and Estate Planning.
We aim to help a persons’ Estate to grow during the time they are a resident in permanent Aged Care whenever possible.