Health Insurance Fair Deal - Transferred Assets

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hydrocarbon

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I have a question on how transferred cash assets are handled in the Fair Deal scheme. There have been a number of posts on this previously and I think I understand how it works but I'd like to check to make sure.

I think the rule is that any gift/transfer of cash assets made in the 5 years prior to (or after) the first application for the Fair Deal scheme is included in the assessed cash means for the lifetime of the applicant. Thus it is not the case that the gift/transfer is only included for 5 years after the date of transfer or 5 years after the date of first application. Is this correct?

Scanning through the legislation I noticed that the "or after" clause was added in 2015. I guess some people figured out/claimed that a transfer made on or after the application date should not count towards the assessed means, as it was not made "in the 5 years prior". I wonder how many people took advantage of this loophole, or tried to.
 
Thanks for that.

Looks like the Fair Deal scheme strongly incentivises early transfers of assets. I saw some report that said 85% of people in the relevant age-group own their house, but only 56% declare it when applying, so that a significant number of people may be transferring their house to their children, though this is not the only possible reason for the disparity.

In short:

- Transfer residence > 5 years before: Not included in assessed means
- Transfer residence < 5 years before: Three year cap applies - same as if not transferred. Nothing to lose by the transfer (from Fair Deal perspective, but also need to look at CAT/CGT)

- Transfer cash assets > 5 years before: Not included in assessed means
- Transfer cash assets < 5 years before: Included in assessed means for lifetime. The asset cannot be run down to zero as nursing home fees are paid. Can be worse off than if no transfer made.

It's an odd set of incentives, and does not seem aligned with Revenue's CAT/CGT approach, which more generally seems to favour inheritance over gifts/transfers and doesn't have this magic number of 5 years. I guess the lesson is to start planning early.
 
hydrocarbon said:
- Transfer cash assets > 5 years before: Not included in assessed means
- Transfer cash assets < 5 years before: Included in assessed means for lifetime. The asset cannot be run down to zero as nursing home fees are paid. Can be worse off than if no transfer made..
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The cash assets can be reduced as nursing home fees are paid. Financial assessment can be redone each year.
 
hydrocarbon said:
.....I guess the lesson is to start planning early....
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The problem with this is people go from being very able to dependent in a very short time. Few people will be willing to transfer their assets where there is nothing wrong with them. It really only occurs to them when they need a high level of care, that they need to do this. At which time its too late.

Also (in my experience) the older people get, more resistance to change, especially big changes. Especially if they weren't in the habit of listening to others anyway.

You won't avoid tax. You'll just end up paying it in a different way. Either via fair deal, gift CGT, or inheritance. You might be able to kick it down the road but at some point it will come due.
 
Slim said:
The cash assets can be reduced as nursing home fees are paid. Financial assessment can be redone each year.
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Real/liquid cash assets can be reduced as fees are paid; however the amount of a transferred cash asset cannot be reduced, as I understand it.

If someone gifts €50,000 to a child, for example, and goes into a nursing home/applies for the Fair Deal scheme within 5 years, then that €50,000 will be included indefinitely in the assessed means, even after all bank account cash is drawn down. So in this case the assets passed on to the next generation would be less than if the gift was not made i.e. making the gift results in a loss compared to not making it. On the other hand if there is a 5 year delay then the €50,000 is excluded entirely from the Fair Deal calculations so making the gift results in a gain compared to not making it.
 
AlbacoreA said:
The problem with this is people go from being very able to dependent in a very short time. Few people will be willing to transfer their assets where there is nothing wrong with them. It really only occurs to them when they need a high level of care, that they need to do this. At which time its too late...
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You make very valid points about the general reluctance to deal with estate/inheritance tax planning, but it seems that for those that want to maximise the assets passed on there is some scope to do so. CAT/CGT cannot be avoided but the amount of assets/size of the estate subject to CAT can be more or less depending on the actions taken, for example to minimise potential Fair Deal contributions. With almost half the applicants not declaring a primary residence perhaps there is more of this advance planning going on now than before.

Also if the proposed means-tested home care equivalent to the Fair Deal ever gets off the ground then a far larger population might end up facing the same issues.
 
hydrocarbon said:
... With almost half the applicants not declaring a primary residence perhaps there is more of this advance planning going on now than before.....
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I assume this means either they are renting n or they have disposed of home before 5 years. It would be interesting to know more detail on the specifics. I assume revenue would know this.
 
I think sick elderly people feel aggrieved that because they are ill or need help they have massive costs paid out of their assets they would have preferred to go their children. Where as others with no assets or not needing care are not hit by this.

I guess that's life.

Another aspect is that the fair deal can mean a disposal of assets quite quickly otherwise some siblings might be very slow to let go of assets and we've seen plenty of stories on these forums about people and siblings taking years to settle estates.
 
Older people see this as not health care but another tax. That they feel they've already paid through a lifetime of paying tax.
 
AlbacoreA said:
I think sick elderly people feel aggrieved that because they are ill or need help they have massive costs paid out of their assets they would have preferred to go their children. Where as others with no assets or not needing care are not hit by this.

I guess that's life.
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I agree many do seem to feel aggrieved, but unjustly in my opinion.

There are many who have contributed by working hard all their lives in less well-paid jobs so have very little to be assessed on in retirement. I have no issue whatsoever with the state funding more of their nursing home care.

I would have an issue with those who can afford to pay more not doing so, to leave their children more.

Most that contribute more still do very well from Fair Deal and still leave a high percentage of their assets to their children or whoever.

Many, rich and poor will never need nursing home care, that’s life.

There will always be some who contribute nothing and get the benefit of everything, that’s life.
 
There's no doubt the operation of the Fair Deal scheme throws up some anomalies, discussed before in previous threads on this forum, that could lead people to feel aggrieved. For example someone who has lived in the cash economy all their life, paid little tax, has no declared assets but always seems to have a new car may get a huge subsidy, while someone that has always paid taxes, saved carefully over the years, and has a modest private pension may end up with a small or no subsidy and see all their cash savings disappearing in a year or two.

I don't think it's good public policy to incentivise the early disposal of assets and this runs counter to the traditional policy of favouring transfers due to inheritance rather than as gifts, but that's the legislation that is there and the same approach is likely to be expanded considerably with 5-year limit applying to a much broader class of assets (farming and business) with amendments to the Fair Deal scheme, and a similar scheme being proposed for home care support.

The following is a link to an article I found on the question of an early transfer of a house for Fair Deal purposes, urging caution. The financial benefits can be offset by potential complications (e.g. children get divorced or have judgements against them). Different families might come to different conclusions but it's certainly something worth looking into.
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Well seems I cannot post a link but a google search for "site:independent.ie your questions answered: should children get share of family home", will bring it up.
 
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