My mother was diagnosed recently with a number of medical issues and she is no longer able to live independently. We will have to go down the route of nursing home care.
Should we use the Fair Deal loan scheme or pay her contribution from our own resources? There are several children who are in a position to make a contribution.
Mr CC, email
Nothing’s ever easy and the answer here, as so often, is that it depends. On what? Essentially on the amount of assets your mother has and her income . . . and on how long she will live.
Fair Deal is not a loan scheme as such but a subsidy by the State of the cost of nursing home care. It can be confused because one element of it is not payable until your mum passes on and the value of her home is realised through its sale or otherwise.
How much of a subsidy Fair Deal amounts to depends on her own financial resources.
Under Fair Deal, she pays 80 per cent of all her income, including share dividends, welfare payments, private pension, whatever. If her home is rented while she is in the nursing home, for instance, they take 80 per cent of that and the Revenue will take half the balance by way of tax on rental income if she is paying at the higher rate.
She also pays 7.5 per cent of the value of her home per annum, capped at 22.5 per cent (ie three years) and payable on death.
And then she is liable to 7.5 per cent of all other assets (savings, shares, other property etc) every year for as long as she remains in nursing home care, with no cap. That’s important to remember. Sometimes people make the mistake of thinking the 7.5 per cent is capped at three years on all assets but that is definitely not the case.
* There is a disregard for the first €36,000 of assets. These is no charge on these sums.
Liquid asset
And if she sells her home, then that becomes a liquid asset and liable to the 7.5 per cent payment every year without any cap. That’s why there are so many vacant homes sitting untouched around the State.
The Government has been made aware of the issue. It appears that a fairly straightforward amendment of the legislation could allow for the sale of the family home, with that money ring-fenced under the three-year cap.
It would have the advantage of giving the State its money sooner (it currently has to wait till the Fair Deal applicant’s estate goes to probate). It would also free up what are generally family homes to help tackle the housing crisis across the State.
For whatever reason, the Government has chosen thus far not to address it.
On the other hand, if she, or you, her children, pay privately, then you can claim tax relief at your marginal rate. That means 40 per cent if you pay tax at that rate. This means you are effectively only paying 60 per cent of the total cost of annual care.
Your mother, or you as her agent, could rent out her home and use the income (after tax) to subsidise the cost of care. In fact, she could sell the home and use that money to defray the cost of care.
The bottom line is that you need to estimate what her contribution would be under Fair Deal and weigh it against the net charge to you all under private care.
Of course, the one unknowable is how long she remains in the home. It is easy to measure the three-year cost of one option against the other but longer-term care will alter the figures.
One thing to be aware of is that some nursing homes’ Fair Deal rate is different, generally lower, than the private rate. You should certainly challenge that with the home if it arises.
At the end of the day, this is both a financial and personal decision. But do your sums. At least then, you are in a position to make the most informed choice.
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
* This piece was edited on November 5th
