Fair Deal/Nursing Homes Fair Deal - thoughts appreciated on our case

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Negatequity

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The facts:
Widowed Mum early 80s considering entering nursing home in Dublin with next 6-12 months.
Assets: Principal Private Residence (PPR) 600k, half share in Investment property 180k, savings 120k, annual income 12k pension + 7k rental =19k


Any suggestions how to best handle the PPR?
  • Sell it increases the cost of (after year 3) fair deal;
  • To rent it out would certainly require an upfront renovation cost of at least 50k perhaps more and many practical headaches, the resultant rental income would in the main part (80%) revert to the HSE than to her.
  • To leave it vacant seems a shame and would probably lead to deterioration.
From the fair deal website: " If you have already been in a nursing home for 3 years when you apply for the scheme, then you do not pay the 7.5% on your principal residence."
It seems the cost of a home paying directly (60k but tbc) might be lower than the eur 80k cost of fairdeal for years 1,2 and 3. Would it make sense to enter a home pay directly and once the savings have run low switch to the fair deal? In this scenario we would pay say 60k year 1, 2, year 80k in year 3 and dropping to 40k in latter years. In theory a saving of 40k over the first 2 years.
 
Re:It seems the cost of a home paying directly (60k but tbc) might be lower than the eur 80k cost of fairdeal for years 1,2 and 3.

Could you please expand on how you formed the impression that applying through Fair Deal costs more than paying direct?.
 
Well it’s my sibling who mentioned the 60k cost of paying for a Dublin nursing home privately and I’ve not checked it myself - you believe she might be (grossly?) underestimating the cost ?
the fair deal cost is a fairly mechanical calculation which I worked out.
Thanks for your comments Fidel
 
Your mum would not have to pay more than the actual cost of the nursing home. If she is at the 'considering' stage, she could spend the 50k on the house and the HSE would accept that as a legitimate expenditure. If the house increased in value by the 50k, the 7.5% ends after 3 years whereas if it was kept in savings it would be levied at 7.5% indefinitely. Yes, 80% of the rent would be payable but there is no point in letting the house deteriorate. However, if the financial assessment is coming close to the actual cost of the nursing home, perhaps it's not as worthwhile.
 
Negatequity said:
Well it’s my sibling who mentioned the 60k cost of paying for a Dublin nursing home privately and I’ve not checked it myself - you believe she might be (grossly?) underestimating the cost ?
the fair deal cost is a fairly mechanical calculation which I worked out.
Thanks for your comments Fidel
Click to expand...

60k is definitely the going rate. My (late) father was paying 4375 per month. The fair deal is a subsidy, so its not possible to state
paying directly (60k but tbc) might be lower than the eur 80k cost of fairdeal for years 1,2 and 3.

If the assessment of (assetts, cash and income) is say for your exaample >60k / annum by the FD simple calculation, then you simply pay the 60k to the nursing home. The Fair-deal will only be beneficial to you in future years when the assessment yields a sum (assetts, cash and income) <60k / annum required by your contract to the nursing home.

Note regardless, you have a contract , with the nursing home, which you must pay by direct debit. The FD subsidy (if any) is separate. Seems your mother is wealthy enough for time being.
 
Thank you both for your clarifications. Some follow up questions if I may please:
1. Does it matter whether the renovation work on the primary residence is conducted before or after she enters the home? I presume better before as it reduces her chargeable liquid asssets and it is a grey area whether the improvements really increase the value of the home by the same amount. However from a practical purpose clearly it would be better if the improvements were conducted after she has moved out. How regularly can her charegeable assets / income be reassssed?
2. If she were to gift her investment property now (ie well with the 5 year clawback window assuming she enters soon) to one both of her offspring < ignoring any gift tax complexities> I understand that her asset charge would continue to be levied as if she still own that asset <fair enough and we have not acted early enough> but would the foregone rental income also be clawed back as if she still held it?
3 In the scenario where she conducted renovation to the principal residence <it might cost much more than 50k) and she was charged on the investment property even though she no longer owned it, some unforseen medical expenses her liquid assets would deplete very rapidly - in that case is she always allowed to keep eur 36k in liquid assets or that needs to be run down too?

thanks again - apologize if this appears convoluted but just trying to think through all the options.
 
1.Does it matter whether the renovation work on the primary residence is conducted before or after she enters the home? I presume better before as it reduces her chargeable liquid asssets and it is a grey area whether the improvements really increase the value of the home by the same amount. However from a practical purpose clearly it would be better if the improvements were conducted after she has moved out. It can be carried out after she goes into care. The overall value of her assets may remain the same or increase but as long as the spending is necessary to protect the property, it can qualify for the 3 year cap. How regularly can her charegeable assets / income be reassssed? Annually on request.
2. If she were to gift her investment property now (ie well with the 5 year clawback window assuming she enters soon) to one both of her offspring < ignoring any gift tax complexities> I understand that her asset charge would continue to be levied as if she still own that asset <fair enough and we have not acted early enough> but would the foregone rental income also be clawed back as if she still held it? Most unlikely as that would be a nightmare to administer. Also, the 7.5% levy would end after 3 years.
3 In the scenario where she conducted renovation to the principal residence <it might cost much more than 50k) and she was charged on the investment property even though she no longer owned it, some unforseen medical expenses her liquid assets would deplete very rapidly - in that case is she always allowed to keep eur 36k in liquid assets or that needs to be run down too? It is that the 1st 36k in assets is disregarded, cash or other.
 
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