Rules on sale or rent of family home now more relaxed under Fair Deal

I have a vulnerable cousin who is now under the Fair Deal scheme. Their brother, who is very close to me but lives abroad, has always valued my advice in relation to the Fair Deal scheme. He took my advice when I explained to him that if his sibling sold their home, the proceeds from the sale of the house would transfer over to the financial assets – and be payable to the HSE at 7.5 per cent per year every year. (I read this also in advice you gave in February 2021)

My cousin has just called me to say he got advice this week and his sibling can sell the house and with no transfer of the assets to the financial assets calculation.

I have looked up the Fair Deal and can see that there were changes made in October 2021 in regards to the rental on a home (40 per cent versus the previous 80 per cent). The three-year cap is also very clear for farm and business but, for me, less clear about the home.

My question is: if you sell your home after three years in care, do the proceeds become yours only and the Fair Deal scheme does not calculate the net gain from the sale of the home going forward and you do not have to declare this financial asset for calculation for the Fair Deal cost?

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Ms R.S.

Sometimes it is possible for two contradictory positions to be correct and this is one of those times. The reason is in the date of the piece that you helpfully include in your letter.

There have been a few changes in the rules regarding Fair Deal – as recently as this month in the case of the rental income measure you mention – so it can be hard to keep abreast of things.

Back in February last year when you were reading my piece, it was absolutely the position that if a person sold the family home while they were in long-term care under the Fair Deal scheme of State financial subsidy, whatever money they made from the sale was added to their general financial assets and became subject to the 7.5 per cent annual levy on those assets ad infinitum for however long they remained in long-term care, availing of the Fair Deal scheme.

The outcome, of course, was that there were thousands of perfectly good homes sitting unused around the State and this became a serious bone of contention for the Government as the housing crisis became ever more acute.

I can see why the original rule was in place, but it became increasingly untenable. As of September 2022, according to the relevant Minister – Mary Butler, who is Minister for State with Responsibility for Mental Health and Older People – there were 22,490 people participating in Fair Deal at an annual net cost of just over €1 billion. Over half of these residents continue to own their homes after they have entered care, she said.

It wasn’t the only anomaly in the scheme. Farmers and business owners also felt excluded from the scheme as, in most cases, the business assets – including family farms – were subject to open-ended contribution as part of the Fair Deal financial assessment. In truth, this was probably the primary driver of change.

So, last year, in May, the Government published the Nursing Homes Support Scheme (Amendment) Bill 2021. In an indication of the general acceptance of the need for change across the political divide and the broadly uncontentious nature of the legislation, it took less than two months to pass through all stages in the Oireachtas and was signed into law by President Michael D Higgins less than a week later, in July 2021.

It came into effect three months later, towards the end of October last year. So what does it say?

[ What happens to carer living in the family home when a Fair Deal patient dies? ]

There are two main measures of interest to people who either have already signed up to Fair Deal or were considering doing so. First, the three-year cap on the 7.5 per cent contribution to the cost of care from the family home was extended to cases where the family home was sold.

This is the information your cousin abroad has clearly picked up on. It does not matter whether the property is sold immediately the person goes into care, three years later, or even further down the line. Essentially, the three-year cap on financial input from the family home is extended to cover any circumstance.

But your cousin will need to contact the nursing home support scheme office with whom he has been dealing on the issue of Fair Deal. Why? Well, in almost all cases, the contribution due from the family home is met with a nursing home loan. Effectively, the HSE takes a charge on the family home up to the amount due – 22.5 per cent for a single or widowed person and 11.25 per cent where a spouse or partner remains in the home.

This charge falls due either when the nursing home resident dies (extended to the death of a spouse/partner if they are still living in the property) or when it is sold.

The prospects of perfectly good properties being left unused as people struggle to find anywhere to live has become politically impossible to defend

Selling the property triggers repayment of the nursing home loan, and your cousin will need to settle the account with the HSE (for whom the Revenue Commissioners act as an agent) within six months of the sale of the property or face the prospect of being charged interest on the amount due. It’s worth noting that this is a shorter window than the one year you have to settle a nursing home loan after the death of the resident.

Clearly, if he sells after three years have elapsed, the full contribution is payable from the sale proceeds. Where he sells before the three-year period is up, he repays the loan due up to that point and meets the balance of any further contribution required on the family home as it falls due.

Importantly – though not applicable to you – the new law also confirmed a three-year cap on contributions against the value for a farm or family business where someone in the family is taking over the running of the business or the farm and continues to operate it as a working farm or business for a further six years after that.

[ Nursing homes say Fair Deal shortfall will force closures ]

Politically, this was very important. Mary Butler correctly referred to it as an “emotive” issue across the country. Farmers now know that the maximum contribution from their farm to their care will be 22.5 per cent of the business.

Rental income

But that’s not all that has changed.

In a further move – from this month, not October last year – the HSE has also changed the rules on any income a person might receive by renting out their family home after they go into a nursing home. And, again, the catalyst was the ongoing housing crisis. The prospects of perfectly good properties being left unused as people struggle to find anywhere to live has become politically impossible to defend.

Until now, in line with the general rule on a person’s annual income under the Fair Deal financial assessment, 80 per cent of the rental income was required to be used to subvent the cost of care. Given the hassles involved in renting, this was entirely off-putting for families and homes were routinely left vacant rather than in useful occupation.

At the start of this month, under a separate piece of legislation – Part 9 of the Regulation of Providers of Building Works and Building Control (Amendment) Bill 2022 – the HSE announced that, henceforth, “anyone in nursing home care supported by the Fair Deal scheme may now have the rental income from their principal private residence assessed at 40 per cent rather than 80 per cent”.

That means the nursing home resident gets to keep 60 per cent of any net rental income, up from 20 per cent previously.

It’s a significant change for those families who are keen to retain the family home of the person in care but also concerned that the 20 per cent of retained income is not sufficient to allow the person in care the quality of life they might like. Twenty per cent may sound like a lot but if your only income is the State pension of €253.30 a week, that amounts to only €50.66 a week, or just under €2,635 a year.

[ Q&A: Will gifting home to son come back to haunt mum needing nursing home care? ]

While Fair Deal should cover the basic cost of your care, many nursing homes – certainly in Dublin – now require the resident or their family to top up that cost out of their own resources.

And then there are all those things that Fair Deal does not cover – medical dressings in many cases, the cost of transfers to a hospital for medical care if required, therapies such a physio, a hairdresser, a chiropodist or other therapist, the cost of outings or other activities, dry cleaning if required or the purchase of a newspaper. If you are looking for something like satellite television – such as Sky – for a broader range of programmes or sport, you’ll pay separately for that too, if it is available as an option at all.

Some of these are clearly discretionary rather than essential, but in the smaller world of a nursing home, they can be very important for residents as they try to live as full a life as possible in what is now their home.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice