FAIR OR UNFAIR DEAL SCHEME-WHEN IT MAY NOT MAKE FINANCIAL SENSE TO APPLY
The Fair Deal offers financial support for those who need long term nursing home care. Under the scheme you make a contribution towards the cost of your care and the State pays the balance. The contribution you make depends on a financial assessment of your income and assets.
HOW MUCH DO YOU HAVE TO PAY?
You typically pay 80% of your income and 7.5% of the value of your assets (above €72,000 for a couple ) so for example if your income is €30,000 and your assets are €372,000, you would pay €46,500 per annum and the State would pay the rest. All assets owned or transferred in the last 5 years are also included.
DO THEY TAKE 7.5% OF THE VALUE OF YOUR ASSETS EACH YEAR?
Yes and No. The value of the family home is assessed for only 3 years (known as the 3 year Cap ) but other assets are assessed for the rest of your life.
WHAT IF I SELL THE FAMILY HOME
Then the ‘3 year cap’ no longer applies and the cash proceeds from the sale of the home are assessed like any other asset.
WHAT IF I RENT THE HOME?
Then 80% of the rental income is also included in the financial assessment. As such most people will opt to leave the family home vacant rather than rent or sell it.
CAN I GET TAX RELIEF IF I PAY THE NURSING HOME FEES MYSELF
Yes. Tax relief is available at the 40% rate if you are a higher rate taxpayer. This could result in a saving of €40,000 annually for a couple paying €100,000 in nursing home fees. In most cases , it normally makes more sense for a child to pay the bill and claim the relief as elderly parents may be paying little or no tax.
WHAT ABOUT TRANSFERRING THE FAMILY HOME TO A CHILD
This is something to consider as assets transferred 5 years before you apply for the scheme are not included in the financial assessment.
ARE THERE ANY TAX CONSEQUENCES OF DOING THE ABOVE?
YES: Proper tax planning is required to ensure that no CGT or CAT is triggered on the transfer. However it could be a good result as the child could then rent out the family home thus avoiding 80% of the rental income being included in the financial assessment. The child can also potentially receive 40% tax relief on this income if they are higher rate tax payers.
CONCLUSION
If you have very little income or assets, ‘Fair deal’ is a great and sometimes the only option to pay crippling nursing home fees. However in other cases, you really need to crunch the numbers and plan in advance to see if it makes sense for you.
Coll Co offer an hourly consultation service, so if you require this services please call the office to arrange an appointment 091 592080 or email [email protected]
