Farming finance: Prudent planning needed to beat the Fair Deal 'Catch 22' of farm families
New legislation could lessen the burden of nursing home costs on farm families, but the Fair Deal scheme still poses complex issues
The Government has approved a proposal to change the treatment of farms and businesses under the Nursing Home Support Scheme, also known as the Fair Deal Scheme. A review of the scheme carried out in 2015 undertook to examine how farm land and business aasets are assessed under the mean test.
Following that, the Programme for Government committed to remove discrimination against small business and family farms under the scheme.
In essence it is proposed to extend the three-year cap which applies to principal private dwellings to farms and businesses where a family successor continues to operate the farm or business for a period of six years.
While the government has approved the proposal, it requires a change in legislation and is not likely to come into force until the autumn at the earliest.
Nevertheless, it represents a measure of welcome relief for many farm families who find themselves facing the prospect of nursing home care cost that could threaten the future viability of their farms.
The change will not provide for free nursing home care for affected farmers, far from it. Nevertheless, it may limit the burden on the farm in many cases to the equivalent of three years care cost. The following case study sets out a typical scenario.
In the example Joe's and his wife's combined annual assessed means is €104,101. Joe is personally assessed on 50pc of this figure for the first three years. The net result means that Joe or his family will have to contribute €52,050 towards his care for each of those three years.
However, as his dwelling and land are not counted from year four onwards his assessed means share reduces to €11,175 resulting in the cost of care reducing to €11,175.
This means that should Joe require more than three years care, his pension will cover the cost from year four onwards.
Had Joe transferred the farm to his son Jack shortly before being diagnosed with Alhzeimers it would not affect the means test as it would need to have been done five years prior to seeking care.
Currently, in exceptional cases where a person falls ill suddenly, a similar three year cap on including the farm assets in the means assessment can apply provided that the successor certifies that they will continue the management of the farm
NURSING HOME LOAN
Where the individual or family do not have the wherewithal to pay the nursing home charges, the payment may be deferred.
This means that they do not have to find the money to pay this contribution during the lifetime of the person receiving care.
Instead, if approved, the HSE will pay the money to the nursing home and it will be collected when the person passes on.
It is effectively a loan advanced by the State which will be secured by a charge on the title deeds to the farm.
Where an individual or couple's farm assets are in the region of €1m, it is likely that the cost of care will be much reduced from year four onwards but the cost for the first three years could be in the region of €180,000.
This, along with any further shortfalls, will have to be found when the person passes on.
As I stated above, it is generally too late to set about transferring a farm when a person falls into ill health if such ill health results in them requiring nursing home care. This is because assets need to be transferred five years before nursing home support is required.
The same applies to other assets such as property or cash. For many people this presents them with a classic 'catch 22' dilemma in that if they don't part with their assets they may have to bear the cost of nursing home care and if they do part they are left with little security.
This requires careful and timely planning to include an assessment of what asset wealth you could retain while still qualifying for the greater part of any future nursing home care cost
Martin O'Sullivan is the author of the ACA Farmers Handbook. He is a partner in O'Sullivan Malone and Company, accountants and registered auditors; www.som.ie
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