This can benefit people who:

  • have insufficient funds to pay RAD
  • have family members that want them to enter a facility that charges a higher RAD
  • are the second spouse of a person entering aged care and want to retain the former home

Potential Benefits:

  • Where a family member loans the funds to finance the RAD, the person saves DAP on the outstanding accommodation payment at the government interest rate (currently 5.96%pa)
  • Amounts invested in a RAD are exempt under income and assets tests for social security purposes

Things to be aware of:

  • Amounts invested in a RAD are an assessable asset for the aged care means test assessment. The outstanding loan balance does not reduce the assessable value of the RAD. This may result in an increase in means tested fees
  • The family member will need to consider the lost earnings on the amount loaned to fund the RAD. There may also be transaction costs and tax implications e.g. if investments have to be sold to fund the loan
  • A loan agreement should be put in place
  • When the person dies, the RAD will be paid to the person’s estate. The Will needs to contain clear instructions if the loan is to be repaid to the family member who provided the funds

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Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.