How to Avoid Selling Family Home To Pay for Care in Australia?

 Table of Contents:

Understanding Aged Care Costs

Aged care costs vary with circumstances, but the decision that most often drives “sell vs keep” is accommodation funding. Accommodation can be paid as a lump sum via a Refundable Accommodation Deposit (RAD), as an ongoing daily charge via Daily Accommodation Payments (DAP), or as a blend. The accommodation choice sits inside the wider fee ecosystem—so if you want the full context beyond accommodation, start with What Are the Aged Care Fees?, then return here to evaluate the home decision properly.

Strategies to Fund Aged Care Without Selling the Family Home

The reason this question keeps surfacing is that families often see only one funding path: sell the home to create cash for accommodation. In reality, the home decision is usually downstream of two earlier steps: understanding how the home is assessed (see family home treatment in residential care) and comparing accommodation funding via RAD versus DAP. The strategies below are ways to create sufficient cash flow while preserving ownership.

1. Renting Out the Family Home

Renting out the home is one of the most common “keep the asset, generate cash flow” strategies. It can help service accommodation costs without a sale, but it can also change what is assessable by introducing additional income. Before relying on this pathway, it is worth understanding how increased income feeds into means-tested care fee outcomes and, if Age Pension eligibility matters, how entering care can affect pension outcomes.

• Income Assessment: Rental income may affect means-tested care fees, as it is considered assessable income.

• Tax Implications: Rental income is taxable and may impact the overall financial situation.

• Property Management: Managing a rental property requires time and effort or the engagement of a property manager.

2. Alternative Payment Methods

Accommodation funding is flexible, and that flexibility is often what removes the false “we must sell” constraint. The point is to choose the payment method that preserves liquidity and reduces knock-on impacts—so treat RAD and DAP as two models to compare, not as a single default.

• Refundable Accommodation Deposit (RAD): A lump-sum accommodation payment that is generally refundable when the resident leaves care. The real decision is whether tying up capital is preferable to paying accommodation as an ongoing daily cost—see how RAD works in practice before assuming “lump sum is always better.”

• Daily Accommodation Payment (DAP): The daily-payment alternative to RAD, typically calculated from the unpaid RAD amount. DAP can preserve liquidity (and sometimes allow you to keep the home), but it also creates an ongoing cash-flow requirement—read Understanding DAP to compare the trade-offs properly.

• Combination of RAD and DAP: A blended approach is often the most practical “avoid selling” strategy: contribute enough RAD to reduce DAP to a manageable level while retaining sufficient liquidity (or rental income) to meet the ongoing daily payments. This only works well when modelled alongside means testing, because cash-flow decisions can alter overall fee outcomes.

3. Utilising Other Financial Assets

Using existing financial assets (savings, investments, and super) can fund accommodation without touching the home, but it should be done with an eye on liquidity and assessment consequences. The question is not merely “do we have the money?”, but whether converting assets into cash changes what is assessable and therefore changes what you pay. If exemptions and asset classification are central to the plan, cross-check this strategy against assets that may be exempt from care home fees and the mechanics in Means-Tested Care Fee Explained.

4. Reverse Mortgages

A reverse mortgage enables homeowners to borrow against the equity in their property without making regular repayments. The loan, along with accrued interest, is typically repaid when the property is sold or the homeowner passes away. While this option provides immediate funds, it’s important to consider:

• Interest Accumulation: Interest compounds over time, potentially reducing the estate’s value.

• Eligibility and Terms: Lenders have specific criteria and terms for reverse mortgages.

If you are considering equity release specifically to avoid a sale, start with How Reverse Mortgages Work and then test the downstream impact under means testing before relying on it as the default solution.

5. Government Assistance and Family Support

Government assistance can reduce out-of-pocket costs, but eligibility is determined through income and assets assessment. The same logic that shapes your contribution level. If you want the clearest explanation of how that assessment translates into what you pay, use Means-Tested Care Fee Explained, and then return here to see how assistance changes (or doesn’t change) the “sell vs keep” decision.

Family contributions can preserve the home, but they should be treated as part of a deliberate plan rather than an informal patch. If a family top-up is being considered to avoid a sale, it should be evaluated alongside the accommodation model (RAD versus DAP) and the household’s likely assessment outcome under means testing so expectations are realistic and sustainable.

Understanding Means Testing for Aged Care

The means test determines how much a person contributes based on income and assets, and the family home sits at the centre of that assessment. The critical point is that the home is not “always counted” or “always exempt” – its treatment depends on protected-person rules and timing. For the calculation mechanics, start with Means-Tested Care Fee Explained; for the practical home-focused decision-path, use What Happens to My House If I Go Into a Nursing Home?.

Exemptions can protect certain assets from assessment, but they are conditional and often misunderstood. If you want a concrete list of what is commonly treated as exempt (and what assumptions fail), use What Assets Are Exempt from Care Home Fees? as the reference point and then map those classifications back to your home and accommodation strategy.

1. When the Family Home is Exempt

The family home can be exempt from means testing under the following conditions:

• Spouse or Dependent Living in the Home: If a spouse, child under 16, or adult dependent relative resides in the home, it’s usually exempt from the means test.
• Carer or Relative Eligibility: If a carer who has been living in the home for at least two years continues to reside there, or if an elderly relative is living there, the exemption may still apply.

These rules mean that families can sometimes retain ownership of the family home without risking it being counted in care fees.

2. Temporary vs Permanent Care and its Impact on the Home

The need for care may be temporary, allowing the family home to remain exempt while your mum is in care. If she returns home, the property would not need to be considered part of her assessable assets. However, if she remains in care indefinitely, then the family may need to make a decision regarding the home’s future.

3. Asset Thresholds and Home Value Limits

For those who do not qualify for full exemptions, the government sets an asset value threshold. Only a capped portion of the family home’s value is considered, not the entire market value. The current capped value changes yearly, making it essential to check current guidelines.

4. Establishing a Financial Strategy

There are ways to preserve assets and reduce the need to sell a home:

• Setting Up a Family Trust: By placing the family home into a trust, it may be possible to protect it from being counted in care costs. However, trusts require foresight and a clear legal structure, as the government scrutinises last-minute transfers.

• Joint Ownership and Inheritance Plans: In some cases, transferring part ownership to a spouse or child may offer protections. Estate planning should be done carefully, as it may have tax or care assessment implications.

5. Plan Ahead with Estate and Financial Planning

Deciding how to handle your family’s assets is easier with an early plan. By working with financial professionals, you can explore options like trusts, shared ownership, and insurance policies to manage care-related costs while retaining family assets.

Common Mistakes to Avoid

Mistakes in asset handling can lead to unnecessary fees or penalties. Here are some common pitfalls to watch for:

• Last-Minute Gifting: Giving away assets shortly before entering care can be disallowed in means testing and may lead to unexpected costs.

• Incorrect Trust Setup: Trusts that are not set up correctly may be considered part of the means test.

• Not Consulting Professionals: Given the complexities of asset protection laws, professional guidance can make all the difference in effective planning.

Also Read: Means-Tested Care Fee Explained