Fair Deal for family on proceeds of house sale
Q&A: Dominic Coyle answers your personal finance questions
Is it too late for my father to give his savings to his family? Photograph: Getty Images
My 92-year-old father is in a nursing home. He availed of the Fair Deal loan and, after the three years’ cap, sold his home and put the money into his bank account. He now pays over €725 per month plus his pension for his care which comes to about €1,500 per month.
Some other patients with him have told him that they pay only from their pensions. They are much younger than him but gave their property/land away to avoid large payments before going into the nursing home. This includes one man who was not even married.
Is it too late for my father to give his savings to his family?
Ms C.McD., email
In short, yes, it is.
The Fair Deal scheme works by getting a contribution from patients towards their care. The contribution is based on their income and their assets – savings, investments and land or property.
Upon acceptance under the Fair Deal scheme, 80 per cent of your income – including income from investments and your pension – is deemed to be your financial contribution towards the cost of your care. If your spouse or partner is alive, this figure is halved.
In addition, a charge of 7.5 per cent of the value of any assets – such as land or property – is also levied as part of your contribution to the cost of care.
Critically, in the case of the family home, there is a three-year cap on this levy. That means that over the first three years of your care, you must pay 22.5 per cent of the value of your home as part of your nursing home care cost. Thereafter, no further charge is made against the family home.
As with the contribution from income, these annual and aggregate contribution figures are halved in the case of a couple.
From your mention of the three-year cap, I’m assuming you are fairly familiar with the set-up thus far.
Where your father – or the family – appears to have misjudged or misunderstood the scheme, at least insofar as retaining the value of assets within the family, is in selling the family home after the three-year cap period. Essentially, the money raised from the sale now comes back into play. As the family home no longer exists, neither does the three-year cap.
The annual 7.5 per cent levy on the value of the property now becomes a 7.5 per cent levy on the money raised from its sale – and this levy is not time-limited. It runs for as long as any of the proceeds of the sale exist.
In the same way, if the property is rented out while the owner is in a nursing home under the Fair Deal arrangement, 80 per cent of any rental income received – minus a few deductions like income and others taxes owing on it – goes towards the cost of care.
This is one of the reasons why there are thousands of properties around the State unoccupied but unavailable. They could be rented out to help alleviate the housing crisis but it makes no financial sense for families to do so.
You refer to other patients in your father’s nursing home having disposed of their property or land assets before applying for the Fair Deal scheme. I’m sure that happens but it’s a bit more complicated than you might think.
There is a clawback arrangement under Fair Deal – both in relation to income and to assets. So, if someone gives away or otherwise disposes of an asset at below market rates, up to five years before they make an application to the Fair Deal scheme, the value of that asset will be included in the calculation of their assets and income – and 7.5 per cent of the value will be required as part of the annual payment even though the person no longer owns the asset.
This is a simple anti-abuse measure put in place precisely to stymie less scrupulous applicants who have the means to contribute towards their care but decide instead to let the State – ie other taxpayers – carry a greater financial burden for that care.
This being Ireland and people’s attachment to land and property being what it is, I’m sceptical on how many will have the foresight to know they will need nursing home care more than five years into the future, and be willing to hand over valuable personal financial assets to others on that basis.
The bottom line in your case is that once the family home was sold, it cannot be recovered. The money raised from the sale then becomes a financial asset and will be subject to the annual 7.5 per cent charge for as long as your father avails of the Fair Deal scheme.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email email@example.com. This column is a reader service and is not intended to replace professional advice.