Russell Kennedy offers advice on how to refund RADS to families who won’t claim because of higher interest rates – plus how to recover debts

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Recently we reported on the issue of aged care providers paying extra on RADs for departed residents because of families holding off on claiming bond refunds to earn the Maximum Permissible Interest Rate (MPIR) – now the law firm has provided advice on what action operators can take to avoid this scenario.

Principal Victor Harcourt has led a webinar titled ‘A practical guide to preventing Debt Recovery & navigating the process’ – with Principals Anita Courtney and Suzanne Rieschieck, Senior Associate Ilana Kacev and Associate Gareth Kerr.

Ilana said providers can try to head off this situation by having the resident’s executor or beneficiaries sign deed of release or indemnity.

This involves asking them a series of questions to evaluate the risk in paying out the RAD before probate is granted, she explained – which could be a solution in the case of a straightforward estate, for example, one where the estate is being divided equally between children and there is little risk of a challenge.

The provider could then elect to pay out the RAD because the family members have signed the indemnity.

Ilana recommended that this payout be made via cheque written out to the resident’s estate so then it will be the solicitors’ responsibility to pay out the funds to those who are entitled.

However, Anita acknowledged there are some families that are smart enough to realise that they will receive a better interest rate by keeping the funds with the provider, citing a case where a couple had each accrued up to $150,000 in interest.

In that scenario, she advised that the provider make a Section 15 application and write to the executor to warn them that they have not applied for probate and if they do not apply, the providers will take the matter to court and seek to appoint an administrator.

Under these circumstances, the provider would also have most of the legal costs covered, she added, making it an effective strategy.

Victor warned providers against simply transferring the bond to the resident’s solicitor, saying it could be a significant risk if the person is not legally entitled to the funds.

With security of tenure arrangements making it almost impossible to remove residents who haven’t paid debts, the presenters also outlined a range of avenues for providers to take to pursue debts.

Ilana said it is also possible for providers to seek to have an attorney removed or receive compensation if a resident owes fees and the lawyer has been misappropriating their funds.

She said providers can choose to make an application to a tribunal to make orders to replace the individual, but this will incur legal fees (or ask a family member to take the same action.

If there is no power of attorney in place, providers can apply to the tribunal for an administrator to be appointed if fees are not being paid.

However, to avoid these situations, she recommended providers ask for a certified copy of the power of attorney on a resident’s admission and check who has been appointed and their contact details and whether it commences immediately or only after the resident loses capacity.

The Senior Associate added that there is a public probate register online that is easy to search to identify if probate has been applied for and also provides the lawyer’s details so you have a point of contact.

While there are no time restraints on contacting VCAT after a resident’s death, there is a time limit of six months to seek compensation orders however – so it is important for providers to move quickly if they suspect the misappropriation of funds.

She recognised that it does often take time for executors to apply for probate – saying it is unlikely to happen within six weeks – but providers can begin by sending a letter to the executor advising them that they will be making a claim after a certain period of time has elapsed.

This has the benefit that it may protect the provider from legal costs down the track if they do need to make a claim.

Gareth also recommended providers put in place a debt recovery policy – detailing what actions should be taken if a debt reaches a certain time threshold, such as 30 and 60 days, or a particular amount.

Also, key is ascertaining the capacity of a resident to pay before they enter by having the resident sign an asset declaration and ensuring the resident agreement is fully completed by either the resident or the resident’s guardian or power of attorney – not their next of kin.

If a resident doesn’t have a power of attorney, Gareth says the best option is to obtain a third-party guarantee that the fees will be paid.

He also stressed the importance of documenting all interactions with residents and families so you have a record later on and advising the resident or family to obtain independent legal advice to counter any argument that they did not know what they were signing.