Fair Deal Scheme Revisited
OVER the years I have written about the ‘Fair Deal Scheme’ and the changes and potential amendments proposed by the HSE. The following is a brief summary of the scheme, together with the 2021 and 2022 changes in legislation to date, and what’s expected in the short to midterm future.
The ‘Fair Deal Scheme’ allows those that require long term nursing home care, the opportunity to apply for financial support towards the cost of care in certain public, private and voluntary nursing homes. An application must be made to the HSE which includes:
A Financial Assessment: This decides how much an individual must contribute to the cost of his/her care and how much State support is required. An individual’s income will be assessed, as will his/her net assets including savings, stocks & shares together with his/her principal residence, land (less borrowings) etc.
It is important to note that it also includes income or assets that he/ she has deprived themselves of in the 5 years prior to their application i.e. the value of prior asset disposals or transfers.
The individual will contribute 80% of his/her income (40% if part of a couple) and 7.5% p.a. of the value of any assets (3.75% if part of a couple). However, the first €36,000 of his/her assets or €72,000 for a couple is ignored.
Nursing Home Loan: This application is optional, but where his/ her assets include land & property, the above 7.5% contribution may be deferred and paid to Revenue after his/her death or deferred until after their partner’s death.
An individual’s Principal Private Residence will only be included in the Financial Assessment for the first 3 years of an individual’s time in care. This is known as the 22.5% or three year cap. This rule has now also been extended in certain circumstances (see below) since October 2021 to Farm and Business assets. All other assets will usually however be taken into consideration for as long as the individual is in care.
Certain changes to the scheme were introduced in October 2021 as follows: Previously, after three years in a nursing home, if a person disposed of their principal private residence, the proceeds would then have been taken back into consideration as a ‘cash asset’ and the above annual 7.5% value would have been calculated thereon going forward. This provision has now been removed. However, it is still important to note that if the house is sold within 5 years prior to the application for the ‘Fair Deal Scheme’ being made, the proceeds will be treated as a ‘cash asset’ in its entirety and charged as such. Conversely, if the house is sold e.g. after 2 years in a Nursing Home, only one further year is added and charged and it is free to be sold without any repercussion on the proceeds received thereafter; The above maximum 3-year rule charge, at 7.5% per annum, that applies to a Principal Private Residence, has now also been extended to an individual’s Farm or Business assets, i.e. provided certain conditions are met as follows:
Where the individual nominates a successor to the farm or business that successor commits to running the business for 6 years the business has already been ran by the individual, his/her spouse or successor, for six of the five years prior to the application at the end of 3 years, the HSE will drop the charge on the farm or business assets. However, a lien or charge is placed on the assets until the successor’s 6-year obligations have been fulfilled.
Further amendments were made to the ‘Fair Deal Scheme’. As an effort to free up more residential housing in the State for those in need (including for those fleeing from Ukraine) 60% of any rent received from an individual’s Principal Private Residence, will now be ignored for the 80% of income charge on the above Financial Assessment. This is clearly to encourage people to rent their houses, while they are residents in nursing homes.
It was expected that 100% of the rent would be ignored on the Financial Assessment. However, the Minister for Older People, Mary Butler, felt at the 11th hour, that the potential loss of entitlement to non-contributory pension payments, as well as the impact of additional rental income on medical card holders, could have an overall negative effect.
In addition, there was a fear that certain individuals could be placed prematurely in nursing homes by relatives who wished to take undue advantage of the new rules on rent per the Financial Assessment. It is feared that when it comes to freeing up, what is believed to be potentially 8,000 such homes for rental purposes, that only circa 2,000 will reach the rental market for various personal family reasons, amongst others.