What is the best way to fund your aged care costs?

Traditionally people have often sold the family home to pay for entry fees (what were known as ‘Accommodation Bonds). But with the government’s current emphasis on a ‘user pays’ system, retaining the home and using aged care finance (such as a Reverse Mortgage) is an increasingly attractive option.

In July 2014, the Living Better Living Longer reforms came into force. People moving into aged care are now required to pay one of the following as an ‘entry fee’ for aged accommodation:

Refundable Accommodation Deposit (RAD)

Daily Accommodation Payment (DAP)

The ‘RAD’ is an upfront lump sum payment to the nursing home. The fee is set by the by the facility, and although the current average is $300,000 to $400,000 but can be much higher in some areas.

In addition, a new ‘Means-Tested Daily Fee’ has been introduced which may add significantly to your overall care costs if the house is sold. Using a Reverse Mortgage to fund or part-fund aged care accommodation is now a viable alternative in many cases.