Making the decision to move into a nursing home isn’t always an easy one. Leaving a long-term home and (potentially) a family behind can take a toll both emotionally and financially.

This isn’t helped by the common misconception that an aged care resident will need to sell their own home to fund the move. Though this might be the best option for some people, there is no requirement to do so, and there are other options available.

Whether your home is still housing other family members, part of an inheritance, or simply holds too much sentimental value to say goodbye to entirely, we’ve put together a few recommendations on how to avoid selling a house to pay for a nursing home, and some suggestions on ways to help with nursing home costs.

But first, let’s take a quick look at what you might be expected to pay.

How much does aged care cost?

Aged care fees will vary from resident to resident, with some fees being means-tested. This means that your finances ahead of moving into the home will be assessed to see how well you can afford to fund the process yourself, without government assistance. Whether you need to complete a means-tested assessment or not will depend on if you already receive a support payment from the government, and if you own your own home. The government may assist by subsidising certain fees for you or for the aged care home itself.

There are limits to how much a provider can charge for aged care residencies, and they will need to provide you with all costs ahead of the move. Fees aren’t fixed forever, so expect them to change at regular intervals in line with indexation.

The general fees you can expect to pay include:

Basic daily fee

Everyone entering aged care will need to pay a basic daily fee. This is paid directly to the aged care home, covering day-to-day services such as meals, cleaning, laundry, and home maintenance.

Means-tested care fee

Some people will also need to pay a means-tested care fee. This contributes to your personal and clinical care while in the nursing home. This amount varies, and changes with indexation.

Accommodation

Aged care providers set their own accommodation prices, determined by several factors including quality, facilities, and location. You may need to pay some or all of this amount, depending on your eligibility for government assistance.

Additional/extra services

Additional services include things that go beyond basic care and service. Think subscriptions to streaming services, access to a hairdresser, or luxury furnishings. The government does not subsidise these, and prices are set by the provider.

If you’d like to know more about the cost of nursing homes, you can check out our Aged Care Costs Explained post for a more detailed breakdown.

So now you know what you’re paying for, how do you do it without selling the family home?

How to avoid selling a house to pay for a nursing home

Seek advice

It’s vitally important that you seek professional advice when beginning this process. We recommend enlisting a specialist aged care financial advisor to help you plan and budget effectively. You may also like to reach out to Services Australia’s Financial Information Service (FIS) or start right here, with our Housing Options For Seniors post.

Check for government assistance

Be sure to stay on top of your entitlements and eligibility for any government subsidy or assistance, as well as anything that might have an impact on your aged pension. Keeping track of your finances and your assets means you can prepare for any cuts or increases along the way – these might mean the difference between keeping your home or selling up!

As markets change, so will the fees you have to pay – means-tested or otherwise – so expect quarterly reviews from Services Australia.

Selling vs keeping

For some, selling the house might feel like the only way to stump up the cash for an aged care home. But it’s important to consider the impact this might have on your means-tested assessments.

Home exemption cap

If you sell the home, the money received is counted as an asset, and will raise the amount you will need to contribute.

If you don’t sell, only a portion of the house’s value, known as the home exemption cap, is included. This means your means-tested fees will be lower, but you won’t have the advantage of having that lump sum of money on hand.

Pensions

Your home is also exempt from the means-testing for aged pensions for up to two years after the move into an aged care home. Holding onto it a little longer might be beneficial in the long term – especially if your spouse remains in the home, as those two years only start when the spouse also leaves.

Protected person

Your spouse staying on has another advantage too, as family members remaining in the home, such as a partner, dependent child, or carer, may be classed as a “protected person”. If a protected person occupied the home before the resident moved into aged care and continues to do so afterwards, the house may not be included as an asset in means-testing at all.

Rental income

You may also choose to keep the home as a rental property, and potentially use the income from that to help fund any aged care fees. However, it is important to remember that rental income can affect your aged pension, and you may need to pay income tax as well. You’re also at the mercy of the local rental market.

Refundable Accommodation Deposit vs Daily Accommodation Payment

When it comes to accommodation, some providers may require a bond. This is known as a Refundable Accommodation Deposit (RAD) or a Refundable Accommodation Contribution (RAC), depending on the outcome of your means assessment. This is, as the name implies, refundable when the resident leaves the home or if they pass away.

RAD payments are likely where any major concerns about selling the home originate, as they can be in excess of $300,000. They are currently capped at $550,000, unless the facility has approval from the Aged Care Pricing Commissioner. As a general guide, if your home is worth considerably more than your potential RAD, it might be worth hanging onto it.

An alternative payment option comes in the form of a Daily Accommodation Payment (DAP) or Daily Accommodation Contribution (DAC). Rather than paying in a lump sum, you may choose to pay the care home in smaller payments – most likely fortnightly or monthly.

It’s important to note that DAPs are non-refundable, and you will end up paying more overall, but if you don’t have the large amount available to you up front, this may be a more appealing option.

Either way, residents will have 28 days from the day they enter the aged care home to decide how they want to make their payments.

Combining the two

Paying a mixture of a RAD and DAP is also an option if you’re trying to avoid selling up. In agreement with your chosen nursing home, you can pay a smaller RAD and use that deposit to reduce your DAPs going forward.

If you have enough savings to do so, this is a good option to both keep the home and ensure there’s money leftover if you leave aged care or pass away.

Residential aged care supplements

The Australian government offers funding supplements to aged care homes to ensure their residents are receiving the specialist, long-term care they need.

Primary supplements are granted for enteral feeding and residents who need a continuous supply of oxygen. Additional funding is also available for a variety of supplementary needs, including respite care, viability for homes in remote and rural areas, and for veterans.

While you won’t receive the money yourself, it’s important to consider whether you may be eligible for them; if your chosen aged care home can access the supplements, it could help with nursing home costs.

Reduce your assets

By reducing your assets, you can change the outcome of any means-testing assessments – and there are ways to do it without selling your home!

Some suggestions include:

  • Purchasing a funeral bond – this covers the cost of a funeral ahead of time, and any burial plots or pre-paid fees assigned to a funeral director will not count towards your assets.
  • Valuing home contents at fire sale value and not replacement value.
  • Gifting assets to family members – this strategy will require very careful planning and it is not advised to jump into it without specialised advice, particularly if anyone holds enduring power of attorney. Centrelink has strict gifting rules in place and giving away assets must be done within their exemption limits.

However you decide to fund a move into aged care, rest assured that there are options that will work for you – and hopefully, we’ve busted the myth that you need to sell up to pay for a nursing home!

At the end of the day, it’s about doing what’s right for you and your family. Research, plan, and budget as much as possible ahead of time, and be sure to reach out to aged care finance specialists who have the know-how to navigate the likes of Centrelink and Services Australia.

References:

  1. Andrew Tynan, 2017, “Should I Sell The Home To Pay For Aged Care Costs?”, Brisbane Aged Care Financial Advisors
  2. Shane Lawler, 2019, “How Not to Pay a Nursing Home Bond”, Core Value Financial Advice
  3. Shane Lawler, 2020, “How to Reduce Assets for Aged Care?”, Core Value Financial Advice
  4. Rodney Horin, 2021, “Aged care myth busted: You don’t HAVE to sell the family home to cover fees”, Starts at 60
  5. Rachel Lane, 2021, “You don’t need to sell your house to fund residential aged care”, The Sydney Morning Herald
  6. Colin Zhang, “Is it worth selling my house if I’m going into aged care?”, ABC News
  7. 2021, “Do I need to sell my home if I’m going into aged care?”, Aged Care Decisions
  8. 2022, “Making sense of RAD and DAP”, Aged Care Online
  9. Aged care home costs and fees”, My Aged Care