Aged care and retirement living providers face a receivables problem that does not arise in most commercial contexts: their debtors are often unable to communicate, and the people who can act on their behalf — family members, attorneys under power, public trustees — are sometimes unwilling to do so. When a resident departs or passes away, the complexity intensifies, particularly where a Refundable Accommodation Deposit (RAD) must be returned while outstanding fees remain unpaid.
The RAD and fee offset
Under the Aged Care Act 1997 (Cth) and the Aged Care (Transitional Provisions) Act 1997 (Cth), a Refundable Accommodation Deposit must be returned to the resident or their estate within 14 days of departure, less any amounts that may be lawfully deducted. Outstanding daily accommodation payments (DAPs), means-tested care fees and other charges that the resident has agreed to pay may be deducted from the RAD before refund, provided the facility has complied with its disclosure obligations and the resident or their authorised representative has been given proper notice.
The critical issue is documentation: the facility must be able to demonstrate that the fee obligation was properly disclosed, agreed to, and that the outstanding amount is accurately calculated. Errors in this process create refund disputes that can delay resolution for months.
Estate recovery
Where outstanding fees exceed the RAD balance, the balance becomes a debt of the resident's estate. The facility is an unsecured creditor of the estate. Recovery requires identifying and engaging the estate executor or administrator, lodging a formal claim, and — if the estate is insufficient — determining whether any assets exist outside the estate that might be accessible.
Estates are not always straightforward. Where a resident owned real property, that property may be tied up in probate for months or years. Where there is no estate — or the estate is insolvent — the debt may be irrecoverable. Document every communication with the family or estate representative from departure onwards.
Next-of-kin liability
Family members and next of kin are not automatically liable for a resident's debts simply by reason of their relationship. A son or daughter who signed a residential agreement as the resident's representative does not thereby personally guarantee the fees unless the agreement expressly provides for it and they signed in a personal capacity — not merely as attorney or authorised representative.
If a family member has signed a personal guarantee as part of the residential agreement, that guarantee is enforceable against them personally, irrespective of the estate position. If they have not, they are not liable — though they remain the appropriate contact for estate administration purposes.
Practical steps for facilities
- Review residential agreements to confirm they include clear fee obligations and, where appropriate, personal guarantee provisions
- Ensure RAD deduction calculations are accurate and disclosed to the estate before processing the refund
- Lodge a formal claim with the estate executor promptly — do not wait for a request
- If the estate representative is unresponsive, consider engaging a specialist in estate debt recovery
If you manage an aged care or retirement facility and have outstanding resident fee debts, speak to Merion about recovery options in this specific context.