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Nursing home loan repayment: What are my options?

Q&A: Family wants brother to live in mother’s house rather than selling it to repay money owed

What happens to a nursing home loan when your mother dies after almost four years in care? Photograph: iStock

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Dominic Coyle
Sun Jul 17 2022 - 16:12

My mother sadly passed away in March. She had been in a nursing home for just under four years. When we originally got her house valued, it was a lot less than the value we have just had done. Will this affect the amount we are due to pay back or do they honour the original valuation?

My brother is going to stay in my mother’s house as it has been the family home for so long it would be heartbreaking to sell it, so my next question is, will he need to pay back the full €106,000 within the 12 months or are there any alternatives?

Is the nursing home loan only relevant for current residence or can you get one of these to pay back Fair Deal and then pay in instalments.

Ms JL, email

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Fair Deal did its job, I guess, in that your mother – and you, her family – had peace of mind during the nearly four years when she required nursing home care.

In the immediate aftermath of a family death, it can be difficult to try to deal with some of the financial practicalities of their financial affairs. Emotions are often too raw.

That is why, in this case, the Fair Deal arrangement provides a 12-month window to address any outstanding contribution due.

In your case, the issue is somewhat complicated by the fact that your brother has decided – or you have all decided – that he will move into the property.

There’s nothing inherently wrong with this but there remains an outstanding debt that has to be paid. As an aside, there also remains the issue of your mother’s will and what she decided she wanted done with the house or any other assets in her estate, but that’s a question for another day. We’ll stick to the narrower confines of your question here.

There are certain circumstances in which payment of a nursing home loan may be delayed. Primarily this happens when the spouse or partner of the person who was in nursing home care is still living in the property, but there are other scenarios where it can apply.

If your brother was under the age of 21, he could apply for a deferral. Similarly, if he did not have assets in excess of €36,000, he could seek a deferral. The same would apply, as it happens, if a sibling of your mum was living there and had assets below €36,000. Others who can seek to delay repayment, so that they can live in the premises, include a relative on disability allowance or some similar welfare payment, whose income does not exceed the amount of the State contributory pension. That also applies if you are in receipt of a foreign pension but below the State pension threshold. Anyone who had cared for your mum before she went into the nursing home could also apply but only if they had been getting welfare support such as the carer’s allowance.

‘Connected person’

Finally, if your mum’s home had been a granny flat, the owner of the main accommodation to which it is attached could apply to long-finger repayment.

Anyone other than a spouse of partner is referred to as a “connected person” – as in connected to your mum. They must also meet certain other eligibility tests. These include that the house on which the nursing home loan is due is their only residence, that they have lived there for three years before the application was originally made for the nursing home loan, that they have no financial interest in any other property.

For those who do qualify, the nursing home loan becomes payable after the death of the spouse/partner or this connected person – or if they sell the property before that.

Given that your brother is only moving into the home after your mother’s death, he will not qualify as a connected person even if he did meet the asset or income tests.

So the clock is ticking and the loan will have to be paid off by next March. And yes, he will need to pay back the full amount outstanding.

You’ve clearly been working on possibilities here, which is never any harm, but I have to tell you the nursing home loan is extended only to meet the contribution to the cost of nursing home care that would have been due on certain illiquid fixed assets – such as the family home or land.

As you’ll know, your mum was required to pay over 80 per cent of her income and 7.5 per cent of the value of her assets (above the €36,000 threshold).

Among the assets, clearly, was her home. The 7.5 per cent contribution was levied against its market value but, unlike all other assets, only for three years. The nursing home loan is designed in recognition of the fact that most people will not sell their family home – especially as until very recently, doing so would make anything you received for it subject to the 7.5 per cent annual charge ad infinitum.

The Health Service Executive will have taken a charge on the property at the time as part of that process.

There is no possibility of the loan being extended or a new loan being offered to your brother with stage payments.

Loan interest

The rules say the loan must be paid within 12 months of your mother dying and, if it isn’t, interest will be charged on the money and that interest will be backdated to your mother’s death in March. According to the Revenue website, the current rate of interest charged is 0.0219 per cent per day.

It may not sound a lot but that will very quickly build up to a substantial sum. For instance, if the loan repayment date passes, your will owe almost an additional €8,500 in back interest just at that point.

It won’t be the HSE you’re dealing with on this, but Revenue who collect the money due on the HSE’s behalf. And the person held liable will be the one who was designated as the accountable person back when the nursing home loan application was made.

So what can your brother do? Well, he can apply for a mortgage to cover the nursing home loan. As the outstanding amount is, I gather, now substantially less than the 22.5 per cent of the valuation made at the time the nursing home loan was sought, he should be an attractive proposition for any lender as long as he has income to make repayments.

If that’s not a runner, then the family will need to consider if they are in a position – and happy – to fund the repayment of the outstanding money upfront, with this brother repaying the sum over time.

You raise an interesting issue about the valuation of the property. A valuation will have been required back when the nursing home loan application was made. It was open to the HSE (or the patient and their family if means had diminished) to seek a review of that valuation any time after a year had passed from the original exercise. However, it appears this has not happened in this case.

That being the case, I think you will be liable only for 22.5 per cent – 7.5 per cent annually for three years – of the valuation of the home back when your mother first applied for the nursing home loan.

But I do think all parties should seek out the advice of both a solicitor and a financial adviser before proceeding because, as I said, the current plans may well run counter to your mother’s intentions as expressed in her will and that could create both tax issues and the potential for discord within the family if everyone is not crystal clear on what this arrangement means for them.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice

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