Many farmers in Ireland struggle to obtain a viable income from farming, and it is often the case that farmers are asset rich but income poor, writes Karen Walsh.
Karen Walsh, from a farming background, is a solicitor practicing in Walsh & Partners, Solicitors, 17 South Mall, Cork. She is also the author of 'Farming and the Law'. Walsh & Partners also specialises in personal injury claims, conveyancing, probate and family law.
Traditionally, farms are often held in the same family for generations, and farms are either transferred to other family members on death, or during the lifetime of the existing owner of the land.
The Nursing Homes Support Scheme (known as the Fair Deal scheme) provides state financial support to people in need of long term nursing care.
However, farmers may be forced to sell part of the farm assets to repay the nursing home fees.
As farmers’ residences are often located on the farm, it can make the remainder of the farm difficult to sell, and may force a sale of the entire farm assets. Farmers are concerned that their children will be burdened with considerable nursing home bills after their death.
The Scheme looks to balance the personal cost of nursing home care with financial support from the State.
The level of State support that an individual is entitled to under the scheme is based on an assessment of their means which takes into consideration the assets held by the person and their income earned.
Under the scheme, the State will cover people who cannot afford to pay for nursing care, but those who can afford it are expected to pay.
Under the Nursing Home Support Scheme Act 2009, assets which have been transferred within a five-year period before the application is made for State support or ancillary State support will be considered for the purpose of calculating the applicant’s means.
Accordingly, if a farmer is transferring his farm to a relative, they must ensure a five-year period elapses between the time of the transfer and the first application for State support.
Many farmers are now choosing to transfer their farms earlier than they would have intended, to avoid nursing home fees reducing the value of their farms.
Under the Scheme, a person can pay nursing home fees upfront, or they can be collected after death by the state.
The calculation for payment used is 80% of a person’s annual income such as pay entitlements or pension, and 7.5 % of the value of the assets such as your farm or principal private residence.
In respect of the principal private residence, the maximum contribution that can apply is 7.5% of the value of the residence for the first three years of care.
This also applies to a farm in certain circumstances, where a farmer has been involved in the day-to-day management of the farm, suffers disability or illness which requires nursing home care, and a family successor certifies that they will continue to manage the farm.
Under the current Fair Deal scheme, farmers need to plan considerably far ahead, from a financial and tax-planning perspective, should they wish to maximise state support towards their nursing home care, and it may be worth their while to consider transferring assets to their relatives earlier rather than later.
Many other factors have to be considered when voluntarily transferring a farm, but farmers are advised to obtain financial and legal advice at an early stage to maximise the benefits for their successors.
If farm assets were to be exempted, this would ease a considerable financial burden on farmers inheriting farms from relatives and would lead to a smoother transition process.
Ultimately, the existing Fair Deal scheme in most cases does not accurately reflect a farmer’s ability to pay nursing home fees, and if a part of the farm is forced to be sold to repay nursing home fees, it can render the remainder of the farm unviable and force a sale of the entire holding.
In addition, the fact that an applicant can be assessed on an asset that has been transferred a few years previously is causing huge difficulty and hardship.
There are real concerns that the viability of some farms is being undermined or lost while trying to meet the cost of care.
The Government has published a review of the scheme, and an interdepartmental/agency working group has been established to progress the recommendations in the review.
These recommendations include examining the treatment of business and farm assets for the purposes of the financial assessment element of the Scheme.
The programme for a Partnership Government has also committed to reviewing the Scheme, to remove any discrimination against small businesses and family farms.