I recently read your article in The Irish Times in relation to the Fair Deal scheme. My husband and I moved into his mother’s home in October 2017 and rented out our home, which is still rented today. In March 2019, his mother gifted her house to him, gift tax was paid and he is now the sole owner of the property with his mother retaining a right of residence.
The three of us still reside there together. I’m wondering, if his mother needed to go to a nursing home, what implications it would have in terms of the Fair Deal scheme?
Ms D.C, email
The bottom line of the Fair Deal scheme is that people pay what is considered a reasonable portion of their income and assets for what remains a very expensive form of care and the State picks up the tab for anything over that sum. The thinking behind it is that affordability does not become a deciding issue for people in determining whether they can access the care they need.
Without such support, it would be down to individual families to care for their older or unwell relatives in most cases as, despite the well-known issues with funding and low pay in the care home sector, nursing home care is still a cost that would be beyond the scope of most ordinary people in Ireland. You will pay about €1,000 a week for a nursing home across the State and closer to €1,300 a week in Dublin.
Even for those who could afford it, you have to get over that Irish reluctance among older people to spend their assets on their own care in their later years. For some bizarre reason, people choose to live in very reduced circumstances just to ensure they have money left to pass on to a next generation who are most often in work and independent on the back of the financial investment made by their parents in their rearing and education.
The basic principle is that each pays according to their means. The financial assessment under Fair Deal says that you will pay 80 per cent of your income and 7.5 per cent of the value of your assets towards the cost of care each year. Those assets include your home but, as a special dispensation, the 7.5 per cent charge on that is capped at three years and can be met through a nursing home loan. This means that the house does not have to be sold and the money due on it can be repaid after the nursing home patient dies.
Where there is a couple in the home, the contribution is half the family income and 3.75 per cent per year on assets, including the home, the latter not being claimed until the last family member dies.
Not unreasonably, there are measures in place to make sure that people pay their fair share. After all, the State is subsidising nursing home care to the tune of more than €1 billion a year for about 23,000 people.
The experience of the Revenue Commissioners is that people, especially those with significant assets and access to professional tax advice, will sometimes go a long way to minimise their exposure to tax, or other State charges. It’s obviously not universal but Revenue spends a long time closing unintended loopholes in tax law and reliefs. So there are anti-avoidance measures built into Fair Deal.
Chief among these is a clawback measure designed to ensure that people who have transferred assets to minimise their Fair Deal contribution do not get away with it. The trigger date here is five years.
When you draw up your financial assessment as part of Fair Deal, you will be required to disclose any assets that you transferred out of your control in the previous five years. Clearly if you sold something, the cash will form part of your assets so that’s not an issue; it is more where you have gifted significant sums – or even properties – to family and friends.
The key here for you is the timing. Your mother-in-law gifted her home to your husband back in 2017, so she no longer owns the asset. All taxes were paid and there is no question over the ownership structure of the property. The fact that she has a right of residence there does not give her ownership. So the remaining issue is one of time.
The five-year window on your mother-in-law’s disposal of this asset expires some time this year, depending on precisely when in 2017 the gifting to her son was formally completed. As long as she does not need nursing home care by then – or, more accurately, as long as she does not make an application for Fair Deal before that date – then no clawback will apply as the transfer will be beyond the five-year threshold.
If there was a short window where she needed care and the five-year anniversary of the gifting had not yet passed, it would make sense for the family to consider taking on the full financial burden of the cost of nursing home care until the five years is up. You can make a Fair Deal application at any point; it doesn’t have to be at the time the person enters care.
It doesn’t apply to you but, if you fail to disclose it and Revenue or the HSE subsequently finds out about it, you will face the prospect of fines of up to €5,000, criminal conviction and even imprisonment.
And both Revenue and the HSE do have several ways of finding out. A particular concern in the early years was people failing to declare their ownership of homes. Back in 2013, a Deloitte report noted that just 53 per cent of Fair Deal applicants said they owned a home at a time when home ownership in the State was closer to 75 per cent. There was concern at the time that checks on people’s financial statements were not being made due to lack of resources. It would not be sensible to assume the same position applies today, given the greater joined-up thinking across State agencies and the advances of digitalisation.
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
