Asset and Income Asssessmen Form - RAD on loan from resident's family member

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Asset and Income Asssessmen Form - RAD on loan from resident's family member

I would welcome comments on this scenario please:
A person lends their parent the amount of the Refundable Accommodation Deposit, by paying it directly to the nursing home (in order to pay the RAD without liquidating the parent's other assets). The loan is not secured by a mortgage or similar. The person (on behalf of the parent) is now attempting to completed the Permanent Residential Aged Care Combined Asset and Income Assessment Form on behalf of the parent.
(a) Is the parent required to include the amount of the RAD (paid by the child on behalf of the parent) in answer to Question 9?
(b) If so, will the RAD be treated as the parent's asset (with resulting increase in the means tested fee payable)?
(c) Can the asset be off-set by the amount of the loan? For example , can the parent show the amount of the loan (i.e. the RAD) in Questions 111 to 113 even though the parent has moved into the nursing home after 1 July 2014 ? (The preliiminary note in Q 110 says  "you only need to complete Qs 111 to 113 if you first entered residential aged care before 1 July 2014). 
Many thanks for any comments. 

Jill_Donaldson

Hi Junior,

I have passed your questions onto our adviser at Affinity Financial Services. I will post their response as soon as available.

regards

Jill

Jill_Donaldson

Hi Junior,

Affinity Financial Aged Care Advice Services team has responded to your query as follows:

In completing question 9- the resident will need to include any amounts paid towards the Refundable Accommodation Deposit, it doesn’t matter the source of the funds.

The RAD will be treated as an asset for the resident and will be counted towards the assessment of their means tested care fee.

All other items remaining the same you would expect an increase in the means tested care fee.

At this point the Department of Human Services does not allow for  RAD’s to be offset by loans.

 

Please note for purposes of calculating a person’s pension entitlement the RAD is an exempt asset and is not assessable.

 

We encourage people to speak to their solicitor when entering into an arrangement to pay the RAD so a loan agreement can be drawn up.

This is because the RAD is repayable to the estate of the resident upon passing and not to the person who funded the payment.

Where the loan is to be repaid to the lender, it is important to have in place the appropriate legal agreement to ensure the lender is reimbursed from the resident’s estate.

 

 

I hope this helps

Regards

Jill 

Junior

Thank you very much for your comments.

Junior

Jill_Donaldson

You are very welcome.

Regards

Jill

Junior

Digging around a bit further, I have come across the Australian Government's Guide to Social Security Law [ http://guides.dss.gov.au/guide-social-security-law/4/6/6/30 ]. I am wondering what to make of section 4.6.6.30 ( headed "Encumbrances & Loans Against Assets") which says:

"Unsecured Loans

If a recipient has an unsecured loan AND provides evidence that the loan was specifically obtained to purchase the asset, the outstanding amount of the loan IS deducted from the value of the asset.

Exception: The value of an asset tested income stream CANNOT be reduced by the amount of an unsecured loan."

This section of the Guide was mentioned in a footnote to an AAT decision (footnote 12 to para 18): http://www.austlii.edu.au/au/cases/cth/AATA/2015/1026.html

I would be interested in people's thoughts about this.   

Many thanks.

Jill_Donaldson

Affinity Financial Aged Care advisers have responded with the following:

 

The Social Security Law deals with the “various payment and benefits provided for in the social security law” http://guides.dss.gov.au/guide-social-security-law/1

Whilst the Aged Care Act provides regulations for Aged Care providers as well as how fees and charges are calculated.

 

In this Act it specifies in Section 44-22 how to determine the means tested amount for care recipients- whilst it utilises social security law for some components in assessing a person’s assets and income, the Refundable Accommodation Deposit is dealt with separately.

Under section 44-26A(5)  it states that if a person has paid a refundable deposit, the value of the person’s assets is taken to include the amount of the refundable deposit balance.

It does not provide for loans to offset the amount paid.

As such the Department of Human Services are assessing the full value of the accommodation deposit when calculating a person’s means tested care fee.

 

The only case we are aware of where the accommodation deposit was reduced by a loan was the Whitby Case.

The family of the resident applied to the Administrative Appeals Tribunal to have decision of Department of Human Services reviewed based on the specific individual circumstances of the case.

 

As this is a complex area of Social Security legislation we suggest you seek legal advice on this matter.

 regards

Jill

 

 

 

 

 

 

 

 

 

Junior

HI, Jill. Many thanks for passing on the further comments. I have also come across an older (2003) Administrative Appeals Tribunal decision (Nock and Secretary to the DFaCS) which might be of (historical?) interest to anyone following this discussion. Particularly comments under the heading "Family loans".

http://www.austlii.edu.au/au/journals/SocSecRpr/2004/2.pdf

Thanks again.

Junior

Jill_Donaldson

Thanks for that Junior

Cheers

jill

Junior

Does anybody know what happens if a person enters an aged care residential facility but passes away before lodging a request for combined asset and income means test? (They were paying an interim means tested care fee set by the facility.)

Jill_Donaldson

Hi Junior

Without knowing how much your loved one was paying for the aged care home fees (and for how long) it may be worthwhile you completing the fee estimator on this website (link provded below).

Our Aged Care fee Estimator will provide you with an estimate of the fees you can expect to pay when receiving Aged Care partly subsidised by the Australian government. Your actual costs may differ. The Income and assets test is based on income/assets at the time your family member went into care.

If your means tested fee comes up as $0.00 per day on our estimator it may be worth your while doing the Assets and Income test. This takes time but depending on the financial amount spent it may be in your interest to do so.

 You can phone Department of Human Services on 1800 227 475 for further guidance.

 

https://www.agedcare101.com.au/finance-tools/aged-care-fee-estimator

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