Q&A - IFA: Fair Deal
Planning for possible nursing home care is hugely important, particularly if you have a farm business, IFA has advised its members.
Planning can help to avoid the worry that the viability of the family farm will be undermined or lost in meeting the cost of care.
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, generally known as the Fair Deal Scheme, for support towards the cost.
Paying for nursing home care from personal savings can be prohibitively expensive.
The average cost of nursing home care is about €900 per week, and the overall average length of stay is 2.9 years, requiring an individual to have personal savings of about €136,000.
The Fair Deal scheme provides great assistance and professional care for many older people.
However, the treatment of productive income-generating assets, such as the family farm, has potentially serious ramifications for the viability of some farms.
IFA has been campaigning since 2012 for a cap on the maximum charge that can be applied to income-generating assets, such as farm assets, to allow farm families make the most appropriate decisions to meet the cost of care.
How does the Fair Deal Scheme work?
The Fair Deal Scheme essentially works out what an individual can afford to pay from their own income and assets, and the State pays the remaining balance.
Nobody will pay more than the actual cost of care. A key feature is the optional Nursing Home Loan, which facilitates the deferral of payment, to be collected from the person’s estate after their death.
An individual contributes up to 80% of their assessable income and a maximum of 7.5% of the value of any assets per annum towards the cost of care.
The first €36,000 of assets, or €72,000 for a couple, is not taken into account in the financial assessment, and the principal private residence will be included in the financial assessment only for the first three years.
The value of the farm assets is also taken into account — there is a 7.5% contribution on the farm asset per annum for the duration of an individual’s stay in the nursing home.
The three-year cap that applies on the principal residence is applied to farm assets only in certain circumstances, where a farmer suffers a sudden illness or disability that requires nursing home care and a family successor certifies that he or she will continue the management of the farm to qualify.
What about transferred farm assets?
The charge on transferred farm assets causes farm families the greatest concern. If a farm asset was transferred in the five years before entering the scheme, it is included in the financial assessment.
The fact that a successor can be held liable for nursing home costs, if the asset was transferred within the last five years, causes real difficulties.
Farm assets are productive assets required to generate income; they are not a measure of ability to pay.
It is unworkable for the successor, as he or she will be limited on the investments he can put into the farm, due to the potentially high liability that remains on the asset.
What might be the cost impact?
The potential effect of the Fair Deal on farm assets is shown in the following example of an “average” single suckler farmer.
The average suckler farm is 33.4 hectares, with an asset value of €611,260. If we assume the farm house is valued at €120,000, the total asset value is €731,260.
As the first €36,000 is disregarded, the farmer’s contribution to care will be based on €695,260.
Average farm income is about €10,369 per annum. If the farmer qualifies for a full personal rate contributory state pension, this is worth €11,976 per annum — totalling €22,345.
Therefore, the farmer’s co-payment, based on 80% of the assessable income is €17,876.
In this scenario, taking the average nursing home care cost of €46,592 per annum, there would be a potential annual liability on the farm asset of €28,716 per annum, when you deduct farm income co-payment of €17,876.
The liability on the assets would be for the duration of the farmer’s stay in the nursing home.
What changes does IFA want?
IFA is campaigning for a cap on the maximum charge that can be applied to income- generating assets, such as farm assets.
Given that the average stay in a nursing home is 2.9 years, a cap would have limited impact on the revenue collected by the State, however, it would make a significant difference to farm families, and allow them to make the most appropriate decisions in meeting the cost of care.
In addition, IFA believes clearer guidelines are needed on the definition of “sudden illness or disability”, as well as the treatment of assets transferred prior to going into the nursing home.
The review of the Fair Deal scheme published in July 2015 recognised the IFA’s position and stated that “consideration … be given to the application of asset-based contribution to family farms and other family businesses, where the relevant assets generate the household’s income, and where the asset would in the normal course pass on to the next generation as a primary income source.”
An interdepartmental/agency working group has been established to progress many of the recommendations contained in the review and is expected to report to the Cabinet Committee on Health in June 2016.
IFA has written to the group requesting an opportunity to make a presentation, which is currently being considered.
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