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Question on Fair deal and Will

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  • 05-06-2024 6:26pm
    #1
    Registered Users Posts: 3,253 ✭✭✭


    My mother wants my sister to have the family home after she has passed on. My mother also has robust savings which will be divided among her other children in her will

    MY question is hypothetical at present but if my mothers needs to go into a nursing home at some point in the future how does the fair deal work with my sister inheriting the home house

    For instance my mother say has 200K in savings and the house is worth 200K

    So in the first year of the fair deal she would pay 15k for house and 15k from savings = 30K to fair deal

    Now savings are reduced by 15k to 185K

    but can we pay the house bill from savings also …so savings are now 170K ?

    So Year 2 bill is 7.5% of house (15k) and savings bill is 7.5% of 185K or 7.5% of 170K? This is not clear

    Also the fair deal payment for the hous is over three years and if the above is not allowed can the fair deal house payments be taken from the 36K threshold with a top up from my sister to keep the house in the family

    Or can we write in a will that all debts are covered by savings first so house has no debt when passed to my sister

    if my mother is a long time in care the proportion charged by FD for the house = 45K in total Can she say in awill that tcomes first from any saving and there after from my sister. it could mean nothing will be left for other siblings but my sister gets the house without debt as my mother wants

    My mother wants this to keep the home in the family.

    But say her care goes on so long and the 45k for the house contribution is not covered by the savings and my ssiter has to sell can the other siblings demand a share of what is left over from the house sale as the sole purpose in my sister getting the house was to ensure it stayed in the family and if its sold that is no longer happening

    what would the wil need to say ?



Comments

  • Registered Users Posts: 872 ✭✭✭grange mac


    Hi i know a bit about supposed fair deal.... When you apply for it... They will take 7.5% of assets annually for 3 years based on valuations when applied for scheme.

    Better off distribution cash beforehand and have as little as possible in own name at time of application.

    Cash can be distributed but all property will be taken into account that were owned within last 5 years. So unless you're 5 years away from nursing home you're gonna have to pay 7.5% property.

    Pm me directly if need more advice.



  • Registered Users Posts: 14,781 ✭✭✭✭elperello


    In general too much cash is a bad idea.

    If you need advice on making a will consult a solicitor.

    This gives a good outline of the so called fair deal.

    https://www.citizensinformation.ie/en/health/health-services/health-services-for-older-people/fair-deal-scheme/



  • Registered Users Posts: 19,280 ✭✭✭✭Donald Trump


    I don't know for certain, but I always assumed that the 7.5% was applied to the estate, not calculated incrementally as you appear to be doing.



  • Registered Users Posts: 93 ✭✭VanHalen


    I’ve been through this also. Firstly the 7.5% only refers to a loan which is given to cover your portion of the bill. For instance say the Nursing home charges €1k per week and your mother is assessed to be liable for say a personal contribution of €800 per week the the HSE pays €200 per week and you have a choice to pay the €800 from savings or get a loan to cover this portion by way of a loan against the house.
    If you get a loan to pay this portion, this is capped at 7.5% for 3 years so the max you would have to pay is 22.5% of the value of the house. So you have a choice - either pay the personal amount from savings or get the loan. If you get the loan then when your mother passes the HSE will look for the repayment of the loan from the proceeds of the sale of the house. I think they give you 12 months to do this. Of course if you don’t take out the loan then the house is protected or indeed if there are residual cash assets you could repay the loan from this and not have to sell the house.

    We decided not to take out the loan as my mother had considerable cash assets. If you do it this way the it’s very important to get the personal amount payable reassessed on an annual basis as the nursing home payments will burn down the assets by around €52k per annum and the personal amount payable will diminish accordingly.

    Post edited by VanHalen on


  • Registered Users Posts: 169 ✭✭Belongamick


    Hi,

    The Fair Deal does not seem to be designed for people who worked hard, saved hard, payed tax all their working lives and now need a bit of support in their twilight years. If you have any form of savings - you are expected to pay a substantial part of your own care. If you never saved a bean, the state will pick up the tab.

    Probably, the most important aspect with the scheme is:

    Transferred assets

    The assessment will look at assets that you have transferred (for example any land, money or property you have given to another person) since applying for State support or in the 5 years before the application.

    In other words, have the conversation with the family and transfer all assets today and hopefully you will be in a position in five years time that if your mother requires support, her assessment will show that she has minimal assets in her name.

    The 'Gift Tax' method can be used to distribute to for example, grandchildren, on an annual basis. 10 grandchildren x $3000 annually over three years - $90,000.

    Gifts you receive up to the value of €3,000 from any person in a calendar year are exempt from Capital Acquisitions Tax (CAT). This means that you may take a gift from several people:

    • in the same calendar year
    • and
    • the first €3,000 from each disponer is exempt from CAT.  

    Gifts of €3,000, as outlined above, are not taken into account in computing tax and are not included for aggregation purposes. 

    This small gift exemption applies only to gifts and not to inheritances.

    Get advice from an accountant and solicitor on the above.



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  • Registered Users Posts: 19,280 ✭✭✭✭Donald Trump


    Well, from the other perspective, a person cannot take it with them when they go. The money is taken out of the person's estate after they die.

    So it really only penalises the potential beneficiaries. There would be nothing stopping said beneficiaries from making alternate arrangements so that the person does not have to go into a home. Some will have to go in regardless, but there are some people who might prefer to live out their days in their own home and might be able to do that if they had a bit of regular and dependable help.

    How would you distinguish between those that worked hard and saved hard (plenty of those people) and those that are wealthy due to some or other windfall (plenty of those too!)?



  • Registered Users Posts: 3,253 ✭✭✭MPFGLB


    My mother is not transferring assests to anyone ..she doesnt want to…she dosnt know how long she will live and what she needs . BTW she worked hard for all her money and never spent a penny

    The Fair deal is 7.5% of property (for up to 3 years) and 7.5% of other assets. It has nothing to do with a loan . The loan is a seperate option that we would not be availing of. Not one peson has addressed my question …can you pay money owed on house for FD (7.5% for 3 years) from assets esp the 38K reserve and if so does the yearly reevaluation of assets allow for what is owed on the house to FD to be taken from savings bearing in mind the savings deplete every year and what happens on 22.5% if owed and savings dont cover as person in care home so long



  • Registered Users Posts: 8,871 ✭✭✭893bet


    Yes. All the assets get valued including any property and then she will owe 7.5 percent. If that 7.5 of the total value is available in cash then that’s perfect.

    Another point of note is it’s not efficient for her to pay it in cash. For example if she transferred the cash now to you and needed nursing home care in 6 years then then for every 1000 you paid the nursing home you could claim tax relief on it if 40 percent (assuming you are on the higher rate). The 1000 would go a lot further!

    Vs her paying 1000 herself and getting no relief on it.

    But any preplanning action is built on trust! And families are complicated.



  • Registered Users Posts: 362 ✭✭SodiumCooled


    She would rather give 10’s of thousands to the state than give it to her family now? Strange outlook.



  • Registered Users Posts: 8,871 ✭✭✭893bet


    For that outlook she either

    1. Does not understand the scheme (5 year rule etc).
    2. Does not trust her family.



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  • Registered Users Posts: 19,280 ✭✭✭✭Donald Trump


    As I said above, as far as I am aware, the 7.5% is assessed in terms of her estate. If she has an asset worth 100k today, the FD scheme will be taking 7.5% of that asset when she dies as a contribution towards for this year of care. If she lives 20 years and the asset inflates to 1m in that time, they will take the 7.5% of the 1 million for this year, not what it was worth 20 years back. They are basically taking a 7.5% share which they realise later. I am open to correction but that is my assumption!



  • Registered Users Posts: 3,327 ✭✭✭phormium


    The amount to be paid is assessed on the house, it doesn't mean the money must come from the house, the monthly bill must be paid from wherever, the nursing home is not going waiting until the end for the money from the house 'sale' as such.

    So the total amount she is assessed to pay can come from her savings or from her savings and someone paying the balance or where there is insufficient then people take the loan based on the house and this is what is paid back at the end. So it's not a question of the house paying any money while she is in there, it's just the house being used as an assesment of how much has to be paid not in it must actually come from the house sale/value.



  • Registered Users Posts: 3,253 ✭✭✭MPFGLB


    Thanks everyone for your replies

    Yes my mother does not want to give her family money …she wants to keep it …she lives in a world where she thinks no one gave her anything therefore she is not giving anyone anything …its just the way it is

    I htought you cant give anyone money without them paying tax on it if above 3K a year?

    However my question is still not answered . I know as I have pointed out, how much the fair deal costs. This is not the issue The issue is again about paying from savings for the house proportion and how that effects the savings and thus the amount owed the following year and how it is calculated or reassesed.

    Say a person lives 5 years in a nursing home. Their house is worth 300k when they go into the nursing home and they have 100K savings In the first year they pay 30k … If that is taken from savings then savings are now 70K

    The the next year 22,500 (for house) + 5,250 = 27,500 Savings now 42,250

    so next year 22,500 (for house ) + 3,168.75 = 25,668.70 savings now 16,581.30…. this is below the threshold of 38K in savings one does not pay in Fair Deal ?

    so cant take savings to cover portion of FD owed for house in year 3 ?

    So my question is can we take these savings below 38K one is allowed to hang onto and used them towards paying the house shared owed in year 3 above so as not to have to sell the house

    Every things works ok if the person has greater savings than the value of their home. but is value of the housee is big then one can run into difficulty

    How does being assessed every year for the fair deal help ?

    So taking the example above again and this time only depleting the savings for the savings section owed in the fair deal

    So for 3 years the house section owes 22,500 x 3 = 67,500

    Here is how savings deplete . It can be seen at the end of year 5 there is 67,719 savinsg left, enough to cover the amount owing on the house but in the years after that amount fals further and wont cover house

    year

    Savings Amount

    Amount owed to FD

    1

    100,000

    7,500

    2

    92,500

    6,938

    3

    85,563

    6,417

    4

    79,145

    5,936

    5

    73,209

    5,491

    6

    67,719

    5,079

    7

    62,640

    4,698

    8

    57,942

    4,346

    9

    53,596

    4,020

    The question is ..The fair deal computation can be done either way above …so which is it ?

    Option one takes both amounts owed from savings as you go but you pay less as the savings deplete faster

    The second way takes saving independet of what is owed on house

    it is not clear how the FD computation is done



  • Registered Users Posts: 8,871 ✭✭✭893bet


    I don’t think you are reading the responses. FD calculation is done on total assets. Cash, houses, shares, jewellery, investments etc.

    You owe a max of 7.5 percent of the total value of the assets and can pay anyway you want (pay in cash, convert shares to cash, put a lean on the house for when it’s sold etc. they don’t care as long as they get paid).

    You can request reassessment every year but unlikely to be worth the bother and the house value could go up in the meantime and work against you from a total asset POV etc (eg the house value might have gone up more than you spent in cash to pay the 7.5 percent).

    The only reason for reassessment of assets on a yearly basis would be if assets had been transferred 3-4 years prior to fair deal application that end up in scope of the fair deal. After 5 years have passed from transfer they are out of scope

    Post edited by 893bet on


  • Registered Users Posts: 2,714 ✭✭✭Lime Tree Farm


    'After 5 years have passed from transfer they are out of scope' @893bet

    - I haven't read up on any of this FD, but had the impression that it was 10 years, when did the 5 years come in.



  • Registered Users Posts: 8,871 ✭✭✭893bet


    I dont recall it being 10 years ever but only been keeping an eye on the scheme the last 7-8 years myself year.


    10 year look back is a long time.



  • Registered Users Posts: 2,714 ✭✭✭Lime Tree Farm


    You're right, I've had a quick look at Karen Walsh's book - Farming & the Law, pg 76-78.



  • Registered Users Posts: 716 ✭✭✭charlesanto


    It is five …

    https://www2.hse.ie/services/schemes-allowances/fair-deal-scheme/financial-assessment/

    Income

    We look at both you and your partner’s income.

    This includes:

    • earnings
    • pensions - this includes state pensions, private pensions and pensions from abroad
    • social welfare benefits and allowances
    • rental income from properties which are not your main home
    • income from holding an office or directorship
    • income from fees, commissions, dividends or interest
    • income you gave away in the 5 years before your application

    The assessment will not include your relatives' or children's income. It will include your partner's income.



  • Registered Users Posts: 4,872 ✭✭✭endainoz


    Its important to know all this information, particularly when it comes to transferring assets to the next generation. The less the person who needs the care has in their name the better. I know it's not a subject people like talking about but succession plans are vital.

    I'm in a similar situation myself, have the farm in my name but not the full five years that required. So now am bound by debt and the farm is suffering as a result. If I was in the know about the scheme id gave sorted the transfer years earlier. Now it's going to cost me 10s of thousands.

    There are stories like this all over the country, new perspective farmers need to be made more aware of these issues.



  • Registered Users Posts: 3,895 ✭✭✭tabby aspreme


    Another thing to get sorted OP is power of attorney, in case your mother at some point in the future cannot look after her own affairs.



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