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We’re having trouble selling family home to meet Fair Deal debt

Q&A: Failure to meet the timelines set down in the terms of the loan can see the sum owed rising

Selling a house to meet your debt on the nursing home costs of a relative can be more complicated than expected

Dominic Coyle's face
Dominic Coyle
Tue Jan 23 2024 - 05:15

What happens when a person dies who was on Fair Deal scheme and relatives can’t pay the money owed until the house is sold?

Mr M.M.

Cost is always the issue when people need long-term nursing home care in Ireland. Most of the available beds are in the private sector and you can pay anything up to €8,000 a month in Dublin for that.

Fair Deal is, for most people, the only way of bridging the gap. It is a system of State subsidy that makes nursing home care affordable. But it’s not cheap. As we’ve mentioned a few times before, the person going into care will have to pay 80 per cent of their income over to the nursing home – 40 per cent in the case of a person whose spouse or partner is still alive. On top of that you are charged 7.5 per cent of the value of all your financial and other assets over a charge-free cap of €36,000 (3.75 per cent and €72,000 respectively in the case of each of a couple).

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Possibly the most contentious element to the Irish psyche is that this 7.5 per cent charge is also levied against the family home, although it is capped at three years (22.5 per cent) regardless of how long you need care. And if you are only in care for a period of less than three years, the total charge comes down pro rata. Again, if you are one part of a couple, the annual charge is 3.75 per cent and the cap is 11.25 per cent.

The bottom line for people is that they naturally do not have lying around the sort of money required to meet that charge.

The alternative then is to take out a loan to cover it. And the HSE facilitates that, offering a nursing home scheme loan at zero interest which is obviously attractive. It means family do not have to worry about that bill while they are caring for their loved one.

But all loans fall due at some point, and so it is with the nursing home loan. When the person in care dies, the clock starts ticking on repayment, unless you seek a deferral because the spouse/partner is still living there or someone else who meets the eligibility criteria for deferral.

You have 12 months to repay the loan after the person dies. If the house is sold sooner, then you have six months from the date it is sold or 12 months from the date of death, whichever is the earlier.

But what happens if you cannot sell the home in that time and you do not have grounds for deferral?

There can be all sorts of reasons for this, including complexities in probate, family being abroad or simply low demand for such properties, many of which due to the age of their owners might be in need of extensive upgrading which can deter new owners.

The first thing you need to take account of is the impact of inflation on the debt. If you do not pay off the loan within 12 months, the HSE will apply an inflationary multiple at whatever the prevailing rate of the consumer price index is. That was down to 4.6 per cent in December but just over a year earlier it was over 9 per cent which would certainly see the debt rising quickly.

So if you had a €400,000 property in Dublin and owed Fair Deal 22.5 per cent of that, the debt would be €90,000 when the homeowner died in December 2022. If that debt was not repaid a year later, you would be facing over €4,000 more due to inflation.

And that interest does not just start at the point the 12 months is up; it is backdated to when the person dies.

Interestingly, that inflation will also be levied on the outstanding debt even where a deferral is allowed because a family member qualifies to stay living in the home.

But it can get worse.

Repayment of nursing home loans is a job undertaken on the HSE’s behalf by the Revenue Commissioners. And it has its own interest and penalties regime for people who fail to pay debts that fall due.

Revenue has two different rates of interest depending on the type of payment that has been long-fingered. The rate applicable to overdue nursing home loans is 0.0219 per cent a day, a figure that has stayed the same since 2009 despite the varying economic circumstances over that time.

It amounts to 10 per cent every year, and there can also be penalties for failing to file necessary returns for simply ignoring your obligations. The person who needs to be most concerned is whomever was listed as the person responsible for organising the repayment of the loan on the documents filled in when the loan was first agreed.

So it make sense to try to get the property sold within the 12-month window. If that is not possible, you really should get in touch with Revenue to make sure you stay onside as much as is possible. In my experience, Revenue has been very willing to work with people as long as it knows they are making real efforts to meet their obligations.

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

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