RAD’s DAP’s RAC’s &

DAC’s

&

PROBATE

Brian Herd

P: 07 3236 2900

E: bherd@crhlaw.com.au

CRH Law

Welcome to Acronym Heaven

Agenda

• RAD DAP RAC DAC

• RAD & RAC rules

• What is Probate

• What are Letters of Administration (LOA)

• Importance of them

• Refunding without Probate or LOA

• Traps Tricks & Tips

RAD RAC DAP DACAccommodation costs must be in accommodation agreement

• RAD• Refundable accommodation deposit

• DAP• Daily accommodation payment

• RAC• Refundable accommodation contribution

• DAC• Daily accommodation contribution

RAD Rules• The Rad Rules

• Up to $550K

• unless ACPC approves higher

• Can be part RAD and Part DAP

• Effectively an interest free loan to you

• Up to a point

• DAP and other fees can be deducted from it

• Must be refunded on exit of resident

• Resident leaves or dies

• From exit interest is payable by you until refunded

RAC Rules

• The RAC Rules

• Based on assessment of assets

• DHS advises on DAC

• Provider can then convert to a RAC

• Resident can elect to pay RAC or part

RAC/DAC

RAD & RAC & Bond Refund Rules

Refund Rules (maximum time)• On day resident leaves facility

• If gave at least 14 days prior notice

• Resident gives less than 14 days notice of leaving

• Within 14 days of giving the notice

• Gives no notice of leaving• Within 14 days of leaving

• Resident dies• Within 14 days of being shown Probate or Letters of

Administration

What is Probate?

• Person dies with a Will– Executor of Will applies to Supreme Court to

determine if the Will is the last and valid Will of deceased

– What does it look like? – see next slide

• A legal process– Application to court

– Advertising

– Court assesses Will for any defects and the death certificate

– Average time to obtain – 6-8 weeks

What are Letters of Administration?

Person dies without a Will (usually!)

• An ‘eligible’ person has to apply to the Supreme Court to be appointed the Administrator of the resident’s estate– What does it look like? – see next slide

• Estate will be administered in accordance with the laws of ‘Intestacy’– The law that prescribes who gets what from the

estate

• Can take a long time– Particularly if dispute about who can be appointed

administrator

Importance of Probate & LOA

• Aged Care Act

– Must refund to resident or

– resident’s estate (ie the Executor)

• Without Probate or LOA

– Never certain you are refunding to right person

– Consequence – may have to pay twice

• With Probate or LOA

– Paying to the right person

Importance of Probate & LOA (cont)

• When resident dies interest on refund starts

to accrue in 2 stages from death

• Pre – Probate or LOA

– The Base Interest Rate (BIR)

– Currently 3.75%

• Post - Probate or LOA

– The Maximum Permissible Interest Rate (MPIR)

from date of being shown Probate or LOA

– Currently 5.72%

Refunding without Probate or LOA

• The law does not require you to require Probate or LOA before refunding – It only sets a maximum time to refund

• The Advantages– Reduces interest rate exposure especially if a dispute over

validity of a Will or appointment of LOA

– Responding to inheritance anxiety

• Need good documentation– Releases and indemnities

• The risks

• My experience

• Get legal advice

Traps Tricks and Tips

• The misguided EPOA

• The anxious executor

• The second marriage

• The RAD loan

• Hardship applications

• Mr and Mrs Resident

Misguided EPOA

• Resident dies and their Enduring Power of

Attorney fronts you

– Wants to authorise you to refund RAD or Bond

• There are 2 deaths here

– Actual death of resident

– Legal death of EPOA

• Do not under any circumstances act on the

wishes of direction of a EPOA when resident

has died

Anxious Executor

• Resident dies

• Next day a daughter fronts you with a Will showing she is the Executor

• Wants to arrange to take possession of her mum’s things

• Bells and whistles

• Actual case of a regional ACF– They allowed her to

– I week later a later Will appointing another daughter as Executor arrives

– Yuk

Second Marriage

• Bob (82) and Beryl (84) in second marriage

• Children from former marriages

• He rich she poor

• Agree to keep assets separate

• Wills give everything to biological children

• Beryl into aged care

• RAD $500k – based on joint assess of assets

• Bob could but refuses to pay– Why?

• Problem for ACF– Didn’t realise what getting themselves into

The RAD Loan

• Some RAD’s are being ‘family financed’– Children

– Relations

• Some financiers providing ‘aged care loans’– Latrobe Financial

• ACF’s requested or ‘directed’ to refund RAD directly to the ‘financier’ or family member on death of resident

• Issues

Hardship Applications

• Res care agreements where RAD subject to sale of residents home

• Delay in sale

• Application to Dept for a hardship declaration– because asset is an ‘unrealisable asset’

• Can declare for a specified period of time

• RAD sits unpaid

• Issues

Mr & Mrs Resident

• Spouses sharing a room

• How to deal with Res Care Agreement and

RAD?

• What if one dies

• How to deal with refund of RAD and

remaining spouse

• Issues

Tips

• Know as much about your prospective residents finances as you can

• Beware of agreements subject to sale of an asset

• Beware of agreements with couples sharing a room

• Seek legal advice if propose to refund without probate or LOA

• Ask for personal guarantees

PS - Biggest claim for unpaid RAD?– Interest of $87,000!

THE END

Or is it?