Should my parents gift me their home to avoid Fair Deal costs?

Introuble83

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My parents are in there mid 60s and have some health complications. They anticipate they have 10 good years of health remaining and will require nursing home care thereafter . They have asked me to consider transferring there home ownership to myself to avoid fair deal costs down the line . The property is worth circa 450k. I understand they will require a right of residence and I will have a tax liability but what other issues are worth considering here
 
Apart from the house, everyone in a nursing home has 80% of their of their after tax pension taken in fees for as long as they're there.

Regarding the house, under current rules, if they keep the house then over the first three years in care they'll each pay 3.75% of the value of the house every year.
So 22.5% of the value of the house will be taken in total, for a €450,000 house that's another €101, 250 that they'll be charged.
There's also the not insignificant risk that the 3 year limit might be raised.

If they want the house to not be assessed then it needs to be transferred at least 5 years before they go into care.
You have a lifetime Capital Acquisitions Threshold of €400K, afaik, from your parents.
Assuming you've not received anything else that leaves you needing to pay CAT at 33% on €50k, which comes out at €16.5K

My layman, back of the envelope calculation suggests a saving of €85,000 with no tax due on that
 
You have a lifetime Capital Acquisitions Threshold of €400K, afaik, from your parents.
€420K as of Budget 2027.

 
Its not just the tax implications,
Your parents are in their mid 60s. Thet can reasonble expect to live for another 18 years and hopefully more.
The average age of a nursing home resident in Ireland is 83 and the average length of stay is 2.5 years. Statistically, they are not likely to need nursing home care until their are in the 80s which is approx 15 years away . A lot can change in that time.
Im guessing you are between 30-45 and we know nothing about your life wrt sibling marraige, kids etc.


Your parents should think hard about giving away their home and get indpedent legal advice.
 
And your parents may prefer to stay at home with a carer rather than go into a nursing home.

So they would take out a life loan to pay for it.

But they can't take out a life loan on a home they don't own.

So, for all these reasons, it's a very bad idea.
 
There are also such arrangements as 'Right to reside' and 'Living Trusts'. The former gives the parents security (though to a lesser extent than Living Trusts) and will avoid Fair Deal charges (subject to the 5 yr look back) while Living trust provides total security but it has fair deal implications.
 
Care in their own home is possibly more attractive than a nursing home.

Also will they want a choice of nursing home I presume, and having no assets might limit that. Believe me there are some awful places out there, I have numerous elderly relatives and I’ve seen a fair few. Money doesn’t guarantee a nicer place but lack of seems to limit choice.

Of course you can pay up any extras from your pocket.
 
The only people that will suffer from fair deal costs will be the op. So tell them you are not worried about that and leave their minds at ease.
There is no single right answer.
I can see the dangers of a 'falling out'.
In my case it's a risk that I think I would be willing to take.

If you've reason to worry, maybe about an in law, you can always frame an iron-clad lifelong tenancy and pay market rent.
 
Care in their own home is possibly more attractive than a nursing home.
This isn't an either/or thing.

My mother, 93 in January, has lived in her own home with a full-time resident carer for several years. But, after a recent hospitalisation, it was clear that, even with a full-time carer, she is not safe at home and she has moved into residential care. If she couldn't have afforded a carer, she would have had to move in to residential care several years ago. Having assets available to her made it possible for my mother to employ a carer then, and now gives her more control over her move to residential care.

Everyone's path is different, and nobody really knows how older age will unfold for them until it actually unfolds. I strongly believe that the priority here should not be to maximise inheritance for the next generation, but to keep options as open as possible and to be ready for as wide as possible a variety of scenarios, so so as to maximise the chance of remaining in control in what can be a difficult and distressing stage of life.

Old age, as they say. is not for sissies, and I would feel extremely guilty if my mother risked compromising her own quality of life in a misguided attempt to maximise my inheritance. This is absolutely not a situation in which the financial tail should wag the quality of life dog, or in which the interests of children should be put ahead of the interests of parents.
 
if my mother risked compromising her own quality of life in a misguided attempt to maximise my inheritance

Seeing as how you obviously care about your mother, how would it have materially compromised her quality of life if she had gifted you her house and she had a "right of residence" there?
 
Most obviously, because she wouldn't have had the option of using the house as security for a loan to pay for a carer, or for other things to improve her quality of life — physical adaptations to the house to accommodate her growing disabilities; funds to pay to move into the residential home of her choice at a time of her choice, pending the proceessing and approval of a Fair Deal application, rather than having to take whatever place is available. As it happens, she has done both of these things.

This is her house, not mine (or my siblings'). It should be used, first and foremost, in whatever way is convenient or appropriate to maximise her welfare and her quality of life. Any inheritance for me or my siblings is strictly limited to whatever remains after those priorities have been respected. The notion of giving away the house while in fact she still needs it (evidenced by the creation of a lifetime right of residence) creates a situation in which the ownership of the house is divorced from the identity of the person whose benefit the house should primarily serve. This can't improve my mother's welfare or quality of life and could foreseeably disimprove it. Risking that so as to protect my inheritance prospects (from what would be a strictly finite risk, given how Fair Deal operates) is a trade-off I would be very uncomfortable about benefitting from. Hence I would strongly urge her not to do this.

On a separate issue, I think your calculation in post #3 of the tax and other implications of the arrangement assumes that the recipient of the house is going to move into it and live there with the parents. The OP doesn't suggest that this is going to be the case (and, in my own family, this would not have been the case).

I say this because, if the owner of the house doesn't live there it will, of course, not be their principal private residence, so any capital gain accruing will eventually be brought to charge. Your calcuation of the financial impact doesn't include any allowance for this.

(And, while it's not a financial consideration, if the owner of the house does live there it creates an emotionally complicated situation, in which there would very llkely be pressure/expectations on them to take on the role of the carer that one or both parents might in time require, so as to avoid or defer the need for them to move to residential care. Mum and Dad may be sanguine about the prospect of moving to a nursing home when the prospect is ten years away; when it's upon them their attitude could easily be different.)

And one other point; your calculation assumes that the parents will live for at least three years after moving into residential care. Not to be gloomy or anything but, statistically, if they lived that long in residential care they would be beating the odds. The OP's parents are in their mid-60s and already have health complications. On the figures, €101, 250 is the maximum that the arrangement could save, but the likelihood is that the actual saving will be less than that.
 
You wrote
she wouldn't have had the option of using the house as security for a loan

Am I correct in thinking that, in the event, your mother did not take up that option?
Because as I understand it, there are big problems with it including how it affects eligibility for the Fair Deal Scheme.
As a result of this and other reasons, such as the rapidly ballooning amount owed due to the compounding effect of the deferred repayments (at higher than market rates of interest), these loans are very uncommon in Ireland.
In the worst case scenario, where the HSE cannot take a charge on the property because of the loan, she might have to come up with the 7.5% of the house value in cash every year, up front, or not be eligible for Fair Deal at all.
 
as I understand it, there are big problems with it including how it affects eligibility for the Fair Deal Scheme.


An article on that aspect of it from last week


Regarding Fair Deal, don’t worry. The scheme operates its calculations based on available income and assets. For the latter, the sum is 7.5pc of the value of your home for three years maximum.

If there’s a pre-existing mortgage on it, then this is taken into account.

In any event, it’s unlikely to matter, since the maximum Fair Deal can take from the value of your home is 22.5pc, well within the limits of what’s left after an equity release mortgage.
 
Your parents should think hard about giving away their home and get indpedent legal advice.
Solicitor Mary Frances in the Indo is always a good read. She thinks it is absolutely wrong for parents to put homes in their children's names, this is how strongly she feels about it:


Mary Frances’s response: Dear reader, I would never advise any client to transfer the house that they live in to their children while they are still alive.

So much so, that unless there are very special circumstances, I often decline to act if people want to transfer their homes to anyone.

It is not a good idea from any perspective as you have since discovered
 
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