What happens to the RAD when a resident passes?

The Short Answer

The RAD is fully refundable. When a resident dies, the aged care facility must return the RAD balance to the deceased’s estate, minus any outstanding fees. It is not kept by the facility.

Think of the RAD as a bond or interest-free loan, not a purchase price. The resident (or their estate) always gets it back.

Refund Timeline

The legal timeline for RAD refunds is clear, but in practice the process has several steps:

The 14-day clock starts when the facility receives the estate representative’s bank account details and identification — not from the date of death. This is an important distinction.

What Can Be Deducted from the RAD

The facility may deduct only amounts that are legitimately owed at the time of death:

• Unpaid daily care fees — basic daily fee and means-tested care fee up to the date of death
• Unpaid extra service fees — if the resident was on an extra service agreement (hairdressing, outings, pay TV, etc.)
• Any agreed combination DAP — if the resident paid a partial RAD + partial DAP, any outstanding DAP amounts to the date of death

The facility cannot deduct:

• Penalties or “exit fees”
• Future fees beyond the date of death
• Room refurbishment or cleaning costs (unless specifically agreed in the residential agreement)
• Any arbitrary or unexplained amounts

Who Receives the Refund

The RAD is refunded to the estate of the deceased person — not directly to family members. The process depends on the legal arrangements:

• If there is a will: The executor named in the will is responsible for collecting the RAD refund. They provide the facility with the grant of probate, their ID, and the estate’s bank account details.
• If there is no will (intestate): A family member must apply to the court for letters of administration to be appointed as the administrator of the estate. This takes longer but follows the same process once appointed.
• If someone else paid the RAD: Even if a family member paid the RAD on behalf of the resident, the refund goes to the estate — not directly to the person who paid it. The person who paid it may have a claim against the estate, but that is a separate legal matter.

Once the RAD is refunded to the estate, it is distributed according to the will (or intestacy laws if there is no will), along with all other estate assets.

Interest on the RAD

While the resident is alive and in the facility, the RAD does not earn interest. The facility effectively has use of the money at no cost — this is how facilities partially fund their operations.

However, if the facility is late refunding the RAD (beyond the 14-day window after receiving bank details), they must pay interest on the outstanding amount. The interest rate is the Maximum Permissible Interest Rate (MPIR), currently 8.34% per annum (as at 1 January 2025).

For a $350,000 RAD, each day of delay costs the facility approximately $80 in interest. This provides a strong incentive for timely refunds.

Combination RAD/DAP Payments

If the resident was paying a combination of partial RAD and partial DAP, only the RAD portion is refunded. The DAP payments already made are not refundable — they were periodic payments for accommodation, similar to rent.

For example:

• Agreed RAD: $400,000
• Partial RAD paid: $200,000
• Remaining $200,000 paid as DAP ($45.72/day at 8.34% MPIR)
• Refund: $200,000 (the lump sum portion) minus any outstanding fees

The DAP payments made over the resident’s stay are not returned. This is one reason families should carefully consider the RAD/DAP split — a larger RAD means more is refunded to the estate.

Disputes and Delays

Most RAD refunds proceed smoothly, but problems can arise:

• Facility delays: If the facility does not refund within 14 days of receiving bank details, they owe interest at the MPIR. Contact the facility in writing and cite the refund requirement under the Aged Care Act.
• Disputed deductions: If the facility has deducted amounts you believe are incorrect, request an itemised statement and compare it to the residential agreement. You can escalate to the Aged Care Quality and Safety Commission.
• Facility financial distress: RAD refunds are protected by a government guarantee. If a facility becomes insolvent and cannot refund the RAD, the Australian Government guarantees the refund through the Aged Care Accommodation Payment Guarantee Scheme.
• Multiple executors or family disputes: If there are disagreements among beneficiaries about the estate, the RAD refund goes into the estate account and is dealt with as part of the overall estate administration.

Estate Planning Considerations

The RAD is often one of the largest assets in a deceased person’s estate. Consider these points:

• The RAD is not “lost” money. Unlike the DAP (which is a recurring cost that is never returned), the RAD comes back to the estate. For families weighing RAD vs DAP, this is a critical distinction — the RAD preserves capital for beneficiaries.
• Keep the will updated. If the person paying the RAD has entered aged care, review their will to ensure the RAD refund is distributed as intended.
• Consider the RAD in the estate’s liquidity. The RAD refund may take 2–4 months to be received. The executor should plan for this when managing estate expenses and distributions.
• No tax on the refund. The RAD refund is a return of capital and is not taxable. It does not need to be included in the deceased’s final tax return as income.
• Impact on beneficiaries’ Centrelink: When the RAD refund is distributed to beneficiaries, it becomes part of their assessable assets. This could affect their own pension or Centrelink payments.

For a detailed look at how accommodation payments affect the overall estate, see our RAD Explained Simply guide.