Kieran Coughlan: Fair deal contribution continues unchanged
From a farming perspective, this scheme is of huge importance, because of its ramifications for Irish farm families.
Even though the scheme has been in place since 2009, many farm families are not aware of how it works, or the implications for the family farm.
In short, where an individual requires nursing home care, there are two options.
Either the individual pays entirely from their own resources for their care, or they can apply to the State through the Nursing Home Support Scheme for support towards the cost of meeting their nursing home care needs.
The cost of nursing home care from personal savings can be prohibitive, given that the average cost of nursing home care stands at over €900 per week in Co Cork, for example, and an overall average length of stay is just shy of three years.
Currently, nearly 24,000 people have applied to the Nursing Home Support Scheme for assistance.
The Scheme essentially works out what the individual can afford to pay from their own income and assets, and the State effectively picks up the remainder of the tab.
Looking at the maths, an individual is expected to contribute up to 80% of their assessable income and 7.5% of the value of their assets per annum towards the cost of their care.
The principal residence is only considered as part of their assets for the first three years.
And the first €36,000 of an individual’s assets, or €72,000 for a couple, is not taken into account during the financial assessment.
From a farming perspective, the value of all farm assets is taken into account.
In the case of farm land, the assessment will cap the contribution payable by a farmer to three years, where that person has had a sudden illness resulting in the individual requiring nursing home care.
For a married couple, each person is assessed based on a half-share of their combined assets and income.
The effect of the Fair Deal scheme is best looked at by way of an example. Take a married farmer who owns a farm valued at €600,000, a farmhouse worth €150,000, and savings of €80,000.
Farm income is €25,000 per annum, and pension income is €430 per week.
In this scenario, the individual will be expected to contribute approximately €49,994 per annum toward their nursing home, or a lesser amount if the cost of their care is below this level, calculated broadly as in the accompanying table.
Where an individual cannot contribute the required amount toward their care, the State will facilitate the deferral of payment, and instead collect payment from the person’s estate after their death.
The latest review confirms that up to the end of 2014, 10% of nursing home care residents had availed of this option, with debts accumulating to Revenue to be collected from their estates totalling €34.9m, as a result.
In practical terms, the Fair Deal scheme is a significant worry for many farmers, who are concerned that the value of their farm to their successor may be significantly eroded, as a result of either themselves or their spouses not being in a position to fund their nursing home costs.
This issue is exacerbated by the fact that a successor who takes over a family farm can be held liable for the nursing home fees of the transferor, where that transferor requires nursing home care with State support within a period of up to five years after the transfer has taken place.
As such, it is ineffective to try to avoid nursing home contributions by either transferring assets to your spouse to indeed your children, at or shortly before the point of entering nursing care.
Minister Kathleen Lynch has stated that the Government has decided to make no changes in this area, and that existing contribution levels will continue.
Meanwhile, the plight of Irish farm families has been highlighted by the farmer organisations, and the report takes cognisance of this, suggesting further consideration will be given to the application of the asset-based contribution in the case of farms.
In the meantime, farm families should take account of the potential implications of the nursing home support scheme as part of their succession planning.
