Aged care and retirement villages: the money decisions in Australia, the UK and the US, with worked examples

• Australia's Aged Care Act 2024 commenced on 1 November 2025; new residents pay a refundable accommodation deposit (RAD) or a daily accommodation payment (DAP), providers retain 2% of a RAD a year for up to five years, and the non-clinical care contribution is capped at A$130,000 over a lifetime or four years.

• England's proposed £86,000 lifetime cap on care costs was cancelled in July 2024; the capital thresholds remain £23,250 and £14,250, and councils offer deferred payment agreements secured on the home.

• US Medicaid looks back sixty months at transfers before it pays for long-term care; long-term care insurance and hybrid life policies are the private alternatives, and a private nursing-home room costs about US$120,000 a year.

Whether the home is sold or kept; whether accommodation is paid as a lump sum or a daily charge; and, for a village rather than care, what the contract takes on the way out. Each interacts with the means test, the pension, the estate and the tax, and each is usually decided in the fortnight after a fall. The families who do it well decide the framework years earlier and leave only the timing.

Residential care has three fee layers: the basic daily fee (85% of the single age pension, about A$64 a day), the means-tested contributions (a hotelling contribution up to A$12.55 a day and a non-clinical care contribution up to A$101.16 a day, both indexed and capped), and accommodation. Accommodation is set by the home at a published room price (up to A$750,000 without approval from 2025) and paid as a RAD (a refundable lump sum, returned to the estate when the resident leaves, less the retention), a DAP (a daily payment calculated at the maximum permissible interest rate, 8.17% at the start of 2026, on the unpaid amount), or a mix. The home is exempt from the means test for two years after entry where a protected person lives there, and otherwise counted at a capped value of about A$206,000. A resident who arrived before 1 November 2025 stays on the old rules under the "no worse off" principle.

Worked example. A widow with a A$1.2 million home and A$300,000 in savings enters care with a A$550,000 room price. Option one: sell the home, pay the A$550,000 RAD, keep A$950,000 invested; the RAD is exempt from the pension assets test but the A$950,000 is not, so the age pension falls to nothing and the means-tested contributions rise to the daily maximum, capped at A$130,000 over four years; the estate receives the RAD back less about A$55,000 of retention if she stays five years. Option two: keep the home, rent it for A$45,000 a year, pay the DAP of about A$45,000 a year from the rent; the home is counted at its capped value only, the pension largely survives, the contributions are lower, and the estate keeps the house and its capital growth; the cost is the tax on the rent and the tenant. Under the old Act option one usually won; under the new Act the retention and the pension effect have narrowed the gap, and for a home with strong capital growth option two now often wins. The decision turns on the rental yield, the retention, the pension effect, her likely length of stay, and what the family wants to happen to the house, which is the question nobody asks the adviser.

In England the local authority means-tests care: above £23,250 in capital the resident pays in full, between £14,250 and £23,250 a tariff income is assumed, below £14,250 the council pays subject to the resident's income. The home is counted unless a spouse, a dependent relative or a relative over sixty lives in it, and disregarded for the first twelve weeks of permanent care. A deferred payment agreement lets the council pay the fees and recover them from the sale of the home later, with interest at a rate set nationally and an administration fee, which keeps the house for the family and lets it be let meanwhile. NHS continuing healthcare pays the whole cost where the primary need is health rather than care, and is worth a proper assessment. The £86,000 cap that was due in October 2025 was cancelled; families planning around it should plan without it. Scotland funds personal care for everyone over sixty-five; Wales has a higher capital threshold of £50,000. A self-funder in a nursing home spends £75,000 to £95,000 a year.

Medicare does not pay for long-term custodial care beyond a hundred days of skilled nursing after a hospital stay. Medicaid does, after the resident's countable assets are spent down to about US$2,000 (the community spouse keeps up to about US$157,000 and the home up to an equity limit of about US$730,000, higher in some states) and after a sixty-month look-back at gifts and transfers, each of which creates a penalty period. Long-term care insurance, bought in the fifties or early sixties, pays a daily benefit for a set period; hybrid life or annuity policies with a care rider return something to the heirs if care is never needed, and have largely replaced the traditional product since its premiums began rising. A Medicaid asset-protection trust, funded more than five years ahead, is the elder-law tool for families who plan early; the tool for families who did not is a spend-down on exempt assets, a Medicaid-compliant annuity, or the personal-care agreement that pays a child for care at a documented rate.

Provincial long-term care is subsidised with income-tested co-payments (about C$2,000 to C$3,500 a month for a private room in Ontario); the home is not counted, and there is no look-back. Retirement residences are private and cost C$4,000 to C$8,000 a month. The planning question is the waiting list, which runs to years for the preferred homes, and the home's sale timing against the principal residence exemption.

A village is not care and is not a purchase in the ordinary sense; the resident usually buys a lease or licence, and the operator takes a deferred management fee on exit, commonly 20 to 35 percent of the entry or exit price after five to ten years, plus a share of capital gain in some contracts and refurbishment costs in most. Australian state laws (New South Wales and Victoria in particular) now require a refund within six to twelve months of leaving whether or not the unit has resold, and standard disclosure documents; British villages sell leaseholds with event fees the Law Commission has criticised; American continuing-care retirement communities take an entrance fee of US$300,000 to US$1 million, refundable in part on a declining scale, with a monthly fee. Negotiate the fee basis (entry price is better for the resident than exit price in a rising market), the refurbishment cap, the timing of the refund, and the capital-gain share. Read the exit clause before the entry clause, and the transition-to-care clause before either.

The move into care or a village is the moment the family home empties, and with it the room where the stories were told. Families sort the furniture and the photographs in a weekend and lose, without noticing, the person who could say what each one was. The recording is easier before the move than after it.