Nursing home charges could leave me homeless

Q&A: Dominic Coyle answers your personal finance questions

Fair Deal is a system of financial support put in place to help cover the cost of private nursing home care in a State where there is very limited public nursing home provision.

Fair Deal is a system of financial support put in place to help cover the cost of private nursing home care in a State where there is very limited public nursing home provision.

 

I currently live in my 70-year-old father’s house, and have done with my family for the last five years. He still lives in the property and the house deeds are in his name.

The house is a standard family home and probably worth about €650k.

My question is, if my father needs to go in to residential care, are there any exemptions on the 7.5 per cent charge on assets that apply in this scenario?

To cover this cost we would need to sell the house when he passes away and, in effect, be left homeless. Is it worth transferring the property to my name now in order to avoid the asset assessment?

– Mr R.H., email

The prospect of nursing home care is daunting for many families. Top of the list for most people is the emotional hurdle of accepting it is no longer possible for a loved one to live in their own home even when, for most people, that is their clear preference.

Next comes the stress of choosing a home that will provide the standard of care, social engagement and stimulation that a family would wish for. It’s an alien world for most people and media reports about less than satisfactory conditions in some homes do little to reassure.

Finally, there is the added burden of worry about managing the cost of any such care. Here, at least, there is some clarity and assistance.

Fair Deal is a system of financial support put in place to help cover the cost of private nursing home care in a State where there is very limited public nursing home provision. Availing of the system makes sense for almost all nursing home applicants.

Essentially, the nursing home patient is required to contribute 80 per cent of their income towards the cost of their care. They are also required to contribute 7.5 per cent of the value of their savings or assets, though the first €36,000 is exempt.

It is important to note that this sum covers the essential elements of care. The balance of 20 per cent of income will be tapped to cover issues like haircuts, optional social activities etc.

As your dad is just 70 and not currently in need of nursing home care, the scenario you paint might not be an issue for many years yet, if ever, depending on his health

If the applicant is part of a couple, the contribution is halved to 40 per cent and the share of assets to 3.75 per cent above a threshold that is doubled – to €72,000.

Family home

A key thing for a lot of people is that the assets assessed does include the family home. However, whereas you pay 7.5 per cent of savings or the value of other assets every year for as long as the person is in care, the charge against the family home is limited to three years. That means the State will not take more than 22.5 per cent of the value of your dad’s home.

People in the scheme contribute up to 80 per cent of their assessable income and 7.5 per cent of the value of their assets per annum, but this may have to be increased. Photograph: Dara Mac Dónaill/The Irish Times
"I am puzzled about your certainty that you would have to sell what is now also your family home to pay any nursing home bill." File photograph: Dara Mac Dónaill

And, critically, in relation to the family home, they do not require payment of the amount due until the patient has died.

As your dad is just 70 and not currently in need of nursing home care, the scenario you paint might not be an issue for many years yet, if ever, depending on his health.

But if it is, there are a couple of things to consider – even outside the lack of any immediate demand for money from his home to cover the cost of care.

You refer to the possibility of putting the house into your name in order to protect it from any calculation of your father’s assets in determining his contribution to his care. This is possible but you would need to do it more than five years before your father goes into a nursing home under Fair Deal.

Clawback

Fair Deal includes, not unreasonably, a clawback on any assets transferred in that five-year period precisely to ensure that people do not game what is already, for most people, a generous support system.

And then there is the issue of gift tax. From what you say, you are not in a position to buy your father’s property from him. That means he would be gifting you a property worth, by your estimation, €650,000.

You would, of course, need to get a formal market valuation to confirm that but, assuming it is correct, the value of the home is far in excess of the €335,000 maximum that you can receive over your lifetime in inheritance and large gifts from both parents.

You would face a capital acquisitions tax bill on anything over the €335,000 at 33 per cent. In your case, this means you would have to find €103,950 in the year the transfer was made to pay the Revenue Commissioners.

So you would be paying €103,950 now in the hope that your father would not need to go into a nursing home for five years: and if he does, the whole process has to be untangled.

This compares with a 22.5 per cent charge – which, on €650,000, would amount to €146,250 – payable only when your father dies.

If that potential €146,250 charge somewhere down the line is such a dealbreaker in holding on to the property, I’m not sure how easily accessible a sum of almost €104,000 will be for you now.

You could sell the house and have around €500,000 in cash to play with in buying a new home for you and your family

I clearly have no detail on your financial position apart from what you mention in your query but, assuming you are working, I am puzzled about your certainty that you would have to sell what is now also your family home to pay any nursing home bill.

Assuming your father goes into care for three or more years before dying, you still have a house worth €650,000, or possibly more by that stage. While you will owe €146,250 or thereabouts under Fair Deal, you would still have equity of over €500,000 in the property.

Depending on your age and financial circumstances, it should not be difficult to persuade a lender to offer a 22.5 per cent mortgage on the property, given they will have security over a far more valuable asset.

And even if it is, you could sell the house and have around €500,000 in cash to play with in buying a new home for you and your family. That would buy you a comfortable family home even in Dublin without any need for a mortgage. So homelessness is hardly an issue here. There are many families in Ireland today who would be only too happy for that level of financial comfort going into the housebuying market.

Finally, just for what it’s worth, if you could, and did, buy the property from your father now rather than him simply transferring ownership to you, it would clearly not be a gift but the full €650,000 would count among his liquid assets subject to the 7.5 per cent charge for as long as he is in care, with no three-year limit.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.

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