My mum is in a nursing home and I arranged a Fair Deal on behalf of my brother and sisters on her property approximately six years ago. The house has remained unoccupied and is sadly deteriorating to the extent that we believe it might be prudent to sell before more damage is done.
The house has been willed to us as her children, and the proceeds to be shared on her death. My question is: can the house be sold before her death and what happens to the proceeds of the sale, assuming that the Revenue gets its slice as agreed in the Fair Deal. Does it just go into her bank account and sit there until after her death, or can the proceeds be distributed beforehand?
I also worry about probate. I know we have 12 months to settle the Fair Deal debt to Revenue from date of death but I know from a current case involving another relation with a very straightforward estate – no Fair Deal, no mortgage, no debt and no complications – that they are still waiting for probate to be granted 10 months post death.
If this is the norm, how can anyone be expected to sell and settle the Fair Deal debt when this part is taking so long. Revenue state in their terms and conditions that interest will start accruing immediately after 12 months post death if the debt is not settled.
On the Money: the personal finance newsletter from The Irish Times
Should you give your child’s teacher a gift card or voucher this Christmas?
Looming launch of auto-enrolment pensions means no honeymoon for incoming minister
Mortgage rates fall again but gap with euro zone average widens - Central Bank
Surely this probate procedure needs to be reviewed and its delays taken into account before Revenue start penalising innocent parties. Or will they take this into account before applying interest?
Mr N.D.
The position you find yourselves in is not unusual. You mother has gone into long-term nursing home care and her home is lying vacant.
This has all sorts of consequences – not least considerably higher insurance costs as the property is unoccupied. But, more importantly, if the property is not maintained, heated and cared for, then it will inevitably deteriorate.
And that will impact any eventual sale price.
A couple of incidental points to make. You talk about arranging Fair Deal “on her property”. There’s understandably a lot of focus on the home end of things because, when a person dies, this will be the subject of outstanding Fair Deal debt, but Fair Deal is much broader than that.
It is a framework determining her financial contribution to her long-term nursing home care alongside a State subsidy to ensure that, regardless of means, she can have access to that care when she needs it.
It sees her contribute 80 per cent of her annual income towards the cost of care (other than rental income as explained above) as well as 7.5 per cent of the value of her assets in excess of €36,000. These assets obviously do include the family home: for most people, that will be their main asset. It is subject to special dispensation, with the 7.5 per cent annual charge being limited to just three years.
So, for a person in your mum’s situation who has been in nursing home care for six years, the charge against her home froze three years ago.
Of course, as the home is not sold, that charge is outstanding, and has been provided for under your agreement on behalf of your mother to sign up for a nursing home loan, which basically pays the nursing home what they would have got on an ongoing basis had the home been a liquid asset. This bill is what will fall due on her death.
You mention Revenue getting its slice. To be clear, Revenue does act as collector of debt under Fair Deal but it does so as an agent of the HSE. Your agreement is with the HSE, not Revenue, and it is the health service that “gets its cut” for the money it has advanced your mother against the debt due on her home while she was in nursing home care.
Getting back to the state of your mother’s home, it’s unclear what your arrangement is here, most particularly whether you have control over your mother’s affairs through an enduring power of attorney. If you have, it is certainly open to you – indeed, arguably expected – that you would take steps to ensure the home did not deteriorate as you manage her affairs in her stead. The cost of doing so would be a charge against her, or her estate if there is insufficient cash income.
One alternative, as you suggest, is selling the property.
Until recently, this was not possible without opening up the resultant cash sum to an ongoing 7.5 per cent annual charge which was daft and saw many families leaving such properties empty in the midst of a growing housing crisis. However, under updated rules, even if sold, your mum will only be liable now for three years’ contribution on the proceeds.
However, the rules do state that any outstanding Fair Deal loan debt must be repaid within six months of the property being sold, so you need to keep that in mind.
You could clearly also rent the house out, although you would have to weigh the necessary cost of upgrading it to do that successfully against any financial benefit to her after tax. Revised rules brought in last year say that only 40 per cent of rental income after tax is assessed as a contribution to care, down from the 80 per cent rule applying to other income.
There was a Government concession to further reduce that figure to zero as part of the price for Independent TD support in a recent motion of no confidence but it remains to be seen if that happens.
In relation to the more fundamental issues you raise, any net proceeds from the sale of the family home after settling the Fair Deal debt are your mother’s for as long as she is alive.
They will initially be lodged to her account and, again depending on who controls her finances, they will either stay there until she dies or can be invested on her behalf if you or someone else has the authority to do so.
There is no way that your mother’s estate can legally be distributed to her heirs under the terms of her will until that will is activated – and that is only upon her death.
As for probate, you are correct that there appear to be very long delays in securing probate these days and it would not be unusual for the process to take the 10-12 months you are concerned about – or even longer. And that’s clearly a concern as you will not be able to close the sale of a property without a grant of probate.
However, you can certainly get the process started. More importantly, although the Probate Office is certainly under pressure, it is not unusual for solicitors to get delayed applications fast-tracked where there is a property sale awaiting closure, as it serves no one, including the Probate Office or the Revenue, to scupper sales that would crystallise assets and allow settlement of any tax debt, etc.
I’m also confident that known delay at the Probate Office to a timely application by the executor of your mother’s estate for grant of probate would be considered by the Revenue Commissioners as extenuating circumstances when it comes to triggering the application of interest on any outstanding Fair Deal loan.
So while it is certainly an unwanted headache, I don’t think any delay in probate should cost you or your mum’s estate financially. Of course, that does depend on the executor filing for probate in a timely manner. If they only apply a week before the end of the 12-month Revenue window for repayment of the Fair Deal debt, I’d expect Revenue to look less charitably at any application for extension of the interest free window on loan repayment.
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
