Accommodation Bonds for Residential Aged Care
New entrants to requiring ‘low care’ or ‘extra service high care’ may be asked for Accommodation Bonds for residential aged care. The Accommodation Bonds for residential aged care are like interest free loans to the operator of the residential aged care facilities.
How much is the Accommodation Bond for residential aged care?
The amount of the Accommodation Bond for residential aged care is agreed with each new resident and/or their attorney or administrator. The maximum Accommodation Bond for residential aged care for a new resident must be at least $43,000 below the value of the person’s net assets.
Thus an Accommodation Bond of $400,000 could be agreed for someone who was living alone in a home valued at over $500,000. Lower amounts of Accommodation Bonds for residential aged care usually apply in localities where the average home value is under $400,000.
Is the person required to actually pay the Accommodation Bond for residential aged care?
No, the new resident does not need to actually pay the Accommodation Bond in full on entry or later. But the residential aged care facility does need to receive enough cash to ensure that it can finance the accommodation.
To allow for different asset holdings, each new entrant to residential aged care has options:
(1) Paying the Accommodation Bonds for residential aged care as a lump sum, or a series of lump sums. The Retention Amount could be deducted from the part of the Accommodation Bond that has been paid; or
(2) Paying regular instalments equivalent to the interest on the unpaid part of the Accommodation Bond for residential aged care plus the monthly Retention Amount, or
(3) Paying part of the Accommodation Bonds for residential aged care as a lump sum and paying regular instalments equivalent to the interest on the unpaid part of the Accommodation Bond. The Retention Amount could be deducted from the part of the Accommodation Bond that has been paid.
The amount of the Accommodation Bonds for residential aged care and the interest rate to be charged on the unpaid part of any Accommodation Bonds are stated in the Resident Agreement. The Resident Agreement is the contract between the residential aged care provider or aged care facility operator, and the resident.
Would the resident be better off paying the Accommodation Bond for residential aged care or just paying monthly charges?
If the new resident happens to have the full amount of the Accommodation Bond for residential aged care sitting in a bank account then it is usually better to pay the Accommodation Bond in full to the residential aged care facility.
Most people entering residential aged care do not have cash ready to pay their Accommodation Bonds. These people could consider selling assets such as the resident’s former home. But if the home is sold then Centrelink could cut the Age Pension and increase the Income Tested Fee for residential aged care.
Leasing the former home might provide enough rental income to cover the monthly accommodation charges. The Centrelink Age Pension and Income Tested Fee rules about rental income are complex: be sure to obtain independent financial advice before you arrange a lease. Financial Care Services assist residents’ families to understand the rental option for financing Accommodation Bonds for residential aged care.
Independent financial advisers can help you understand your options. Before deciding to sell assets to pay an Accommodation Bond ask Christine at Financial Care Services for advice about how selling assets would impact on the Income Tested Fee and any means tested pensions such as the Age Pension.
At Financial Care Services, we can illustrate the financial aspects of your options for financing Accommodation Bonds for residential aged care. You could then have a sound basis for your family’s decision about financing an Accommodation Bond for residential aged care.
What are the Accommodation Bonds for residential aged care used for?
The residential aged care provider, or aged care facility operator, is only permitted to spend Accommodation Bond money to repay the Accommodation Bonds of departing residents, paying out their mortgages on existing aged care facilities, buying and/or building new aged care facilities.
Any Accommodation Bond not spent on aged care facility land and buildings must be invested in prescribed types of financial products. The aged care facility operator must have a written ‘investment strategy’ to guide its decisions regarding investment of Accommodation Bond money into financial products.
Financial Care Services is licenced to provide independent financial advice to aged care operators regarding investment of Accommodation Bond money. Christine Hopper at Financial Care Services could assist you with your ‘investment strategy’ and financial product selection.
What happens to the Accommodation Bond for residential aged care when the resident moves on?
The Accommodation Bond for residential aged care is refunded within 14 days of a resident leaving the aged care facility whilst still breathing. If the resident, or their family, give at least 14 days notice that the resident is moving out then the Accommodation Bond is refunded on the day that the resident leaves.
If the resident dies before their Accommodation Bond has been refunded then the residential aged care provider or aged care facility operator, must defer paying out the Accommodation Bond. Once the executor of the resident’s Will shows the probate notice, or letters of administration, to the aged care operator then the Accommodation Bond for residential aged care must be refunded within 14 days.
Interest can be added to the amount of the Accommodation Bond to be refunded to allow for the delay in repaying the Accommodation Bond to the deceased resident’s estate.
Are the Accommodation Bonds for residential aged care guaranteed?
The Australian Government guarantees the repayment of Accommodation Bonds if the aged care facility operator becomes insolvent and is unable to refund their residents’ Accommodation Bonds.
In the few cases where the residential aged care provider did not have enough money to repay all of their residents’ Accommodation Bonds, the Commonwealth made sure that no resident’s Accommodation Bond for residential aged care was lost; every resident, or their estate, was repaid their Accommodation Bond in full.
You can read the Australian Government Fact Sheet about Accommodation Bonds at http://www.commcarelink.health.gov.au/internet/main/publishing.nsf/Content/391640A07DB6A554CA256F19001007B2/$File/Info-Sheet-16-SEPT12.pdf
Where to go for help understanding Accommodation Bonds for residential aged care?
Financial Care Services is an independent financial advisory service dedicated to providing client families with specialist advice about financing Accommodation Bonds and/or charges together with the Centrelink or DVA, implications of residential aged care.
To make an appointment for a consultation about financing Accommodation Bonds for residential aged care call Financial Care Services on 03 9808 0338.
Advice can be provided by email and telephone for clients who cannot easily come to our office in suburban Melbourne. Evening and Saturday appointments are possible for families unable to come during standard business hours.
If you would like further confidential, independent and professional advice about Centrelink, lifestyle or financial issues please contact Christine Hopper (03) 9808 0338.
Financial Care Services – call (03) 9808 0338
Disclaimer: The information contained in this website is of a general nature only and does not constitute “financial advice”. You should obtain your own personal financial advice before investing any money or moving in to any retirement village, lifestyle community or aged care facility. Financial Care Services is licensed to provide financial advice to individual clients based on their personal situations. © 2013 Financial Care Services Pty Ltd. All rights reserved.
To make an appointment for professional advice, call Financial Care Services (03) 9808 0338