Your MoneyQ&A

Fair Deal: Nursing home care costs will limit scope for tax-efficient small gifts to family

Gifts of up to €3,000 may be tax exempt but they will still be assessed as savings under the nursing home support scheme

Older relatives often like to give their children and grandchildren a little financial support but it is limited under Fair Deal. Photograph: iStock
Older relatives often like to give their children and grandchildren a little financial support but it is limited under Fair Deal. Photograph: iStock
Dominic Coyle's picture
Dominic Coyle
Sun Jan 26 2025 - 15:30

Under the Fair Deal scheme (subsidising the cost of long-term nursing home care), I understand that a person has to declare any cash gifts or presents they have given over the past five years before entering the scheme.

Does it include the €3,000 small gift tax exemption gifts as well please? I know that it is exempt from CAT but is it exempt from inclusion in assets under the Fair Deal assessment please?

Also, if the Fair Deal resident’s savings are over the €36,000 exempt from assessment, can they still continue to make small gifts?

I see in the Fair Deal legislation that residents are not permitted to make cash gifts from their savings, which is rather strange. Perhaps it comes from a concern the €36,000 will be squandered and the resident will have to then throw themselves on the mercy of the HSE for their cost of hospital taxis, medicines, etc.

READ MORE

Ms J.B.

Nursing home care is expensive, very expensive. If you are a long-term resident in a private nursing home in Dublin these days, you can expect to pay about €7,000 a month for the privilege. The rates outside of Dublin are generally lower but not by a lot.

As a result, apart from the minority of people who have very significant liquid assets, the bills present a challenge. This is especially so for people who may not have much in the way of cash savings or other assets (such as shares or bonds) that can easily be liquidated but who live in a home that is valuable either by virtue of its size or, more likely, location.

And as the State has a very limited number of public Health Service Executive nursing home beds, the decision was made to establish a scheme to subsidise the cost of private long-term nursing home care.

Under Fair Deal, as this is called, the resident agrees to pay 80 per cent of their income to the nursing home to fund the cost of care if they are a single or widowed person. That falls to 40 per cent of family income where there is a spouse or partner still living n the family home.

They also agree to pay 7.5 per cent each year of the value of all assets over a certain limit. For a single person, that limit is €36,000 as you point out: it rises to €72,000 of family assets where the nursing home resident has a spouse/partner back at home.

That 7.5 per cent includes the value of the family home – and this shows how treatment of assets can change depending on the scenario or tax heading. For instance, if you were to sell the family home, it is exempt from capital gains tax, regardless of how much it has increased in value since you bought it. But it does come into the equation for Fair Deal – albeit only for the first three years of care.

Perhaps it is no coincidence that the average duration of long-term nursing home care is also about the three-year mark.

The State agrees to fund the rest of the cost of care.

Even at that, the sector is running on a financial tightrope. A recent report from consultants BDO stated that over half of Irish nursing homes did not report a profit in 2023.

There is constant tension between private nursing home operators – increasingly corporate groups rather than individuals – who complain that the rates paid to them under Fair Deal have not risen anything like in line with rising costs and the State that, as always, has myriad calls on its (our) money.

The fact that the State pays significantly more financial subvention per nursing home bed in the public sector than in the private sector – the gap is €640 a week, according to BDO – would seem to support private-sector operators in their claim that the State is quite knowingly and deliberately underfunding the sector – which is, as we know, essential for people who for medical reasons can no longer live at home (in part because there are not enough at home carers available but that’s a story for another day) and their worried families.

As a result, many families – in Dublin certainly – are finding that they are required to pay “top up” premiums over and above the 20 per cent limit for the basic care that is supposed to come under Fair Deal.

All this is to show just how much pressure the system is under. And to note that, regardless of the differences between the State and the operators, Fair Deal is one of the most significant “welfare” supports available in Ireland to care for our elderly at a time when they are vulnerable, financially and otherwise.

Small gift exemption

The small gift exemption is another potentially generous tax relief from the State. It allows anyone to give up to €3,000 to any person every tax year with no tax liability on either side – either under income tax or capital acquisitions tax (inheritance/gift tax) legislation.

There is, of course, no guarantee of such income for the beneficiary and no obligation on the benefactor. If the person can afford it and chooses to make the payment so be it.

But people are much more constrained in what they can do with their assets under Fair Deal. They are not prevented from making such payments but it will not be exempt under the Fair Deal assessment of the resident’s contribution to the cost of care and the assessment will not recognise it and will assume that the money still forms part of the resident’s assets.

That does not mean the money has to be paid back but the resident will still be charged on the basis it forms part of their assets.

The same applies to the five-year clawback. If payments under the small gift exemption are made to family, or indeed anyone, in the five years before someone applies for Fair Deal support, the HSE financial assessment will include them.

As with the principal private residence tax exemption above, just because this is a tax relief does not give the nursing home resident the benefit of reducing the value of their estate while claiming very significant financial support from the State. You’re not obliged to apply for Fair Deal but, if you do, you are subject to its regulations.

As someone who has read the legislation, you’ll be aware that there is no specific mention of the small gift exemption. However, there are several references that do clarify the position.

First, the description of “cash assets” for the purpose of financial assessment of means specifically includes “a transferred asset which is a cash asset. And it defines “transfer” in relation to an asset as including the “transfer ... by gift of that asset”.

Under the legislation – the Nursing Homes Support Scheme Act 2009 – “a ‘transferred asset’ means an interest of the person in an asset (whether a cash asset or a relevant asset) which has been transferred at any time in the period of five years prior to the date on which an application for State support is first made”.

And yes, the concern is that a person’s assets will be reduced at an additional cost to the State of providing private-sector care for the nursing home resident.

The Fair Deal contribution does only cover the essential medical and person care of the resident. Everything extra – from a haircut or blow dry to even the cost of shampoo, or additional equipment, clothing or medication required (below the drug payment scheme limit), or even a newspaper or, in some nursing homes, the cost of getting involved in social activities provided – comes from the remaining 20 per cent of income and, where that does not suffice, the savings.

In those cases the resident, or those representing them, can seek a review of the financial assessment. A review is generally carried out after three years regardless.

Bottom line: can the resident make payments under the small gift exemption. Yes, they can. And it will be seen as coming from the charge-exempt €36,000 savings limit. But, from Fair Deal’s perspective, it does not reduce the €36,000 and allow the transfer of other savings to top that exempt savings pot up. The financial assessment assumes the resident still has that €36,000 – regardless of what the resident actually chooses to do with it.

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 with a contact phone number. This column is a reader service and is not intended to replace professional advice

READ NEXT