Stricter Fair Deal rules to stop heirs from cashing in
Young farmers and small business owners will be tied to lands and firms for six years
The long-awaited overhaul of the Fair Deal scheme to reduce the burden on farm families and small business owners has been approved.
A review of the Nursing Homes Support Scheme, published in 2015, committed to reviewing how productive assets are treated under the scheme.
Last year Government approved a policy proposal recommend by the Ministers to change how such assets are treated under the Scheme. The Government has now approved a General Scheme of a Bill to give effect to that policy decision and has approved the drafting of the legislation in accordance with the General Scheme.
But the Irish Independent has learned of strict rules around how the succession of assets is dealt with.
The current system sees farm families and small business owners required to set aside 7.5pc of the value of their land annually to fund a place in a nursing home.
Under a plan devised by Minister of State Jim Daly, this will be capped at three years in future. However, in order to qualify for a 'fairer deal', the farmer/business owner, their partner or nominated family successor must have worked the farm or business for three out of the previous five years.
Before the person enters nursing home care, their successor must also provide a statutory declaration that they will work the farm or business for at least the next six years.
Conditions include a legal undertaking he or she will repay the full amount of the State subsidy if they fail to complete the six-year period.
The move is being seen as a way to identify genuine cases of families who qualify and prevent heirs from cashing in on their inheritance.
As part of a commitment to the 'clawback' mechanism, the successor must consent to a charge being applied on land or property if they break the terms of the contract.
Some flexibility will be applied in cases where the nominated successor finds themselves unable to continue working due to illness or death. In such incidences, the family will be able to select a new successor without being hit by additional charges.
The reforms will be welcomed by farming and business communities who have long argued that the existing regime left inheritances unviable.
However, they are likely to be concerned over the 'six-year rule' as this will limit their ability to secure an income from leasing land or assets.
The heads of bill to be brought to Cabinet today had more than 20 sections.
The Office of the Attorney General, Séamus Woulfe, has been heavily involved in drafting the bill amid concerns over how it will affect property rights.
Sources say he is now satisfied that it should proceed on the basis that the three-year cap on charges will only apply to those who keep their assets within the family.
Failure to do so would mean the land or business is deemed an "investment asset" rather than a "productive asset".
Although the heads of bill have been agreed today, it will be the end of year at the earliest before the necessary legislation to implement the changes is ready.
The Department of Health will now engage in Pre-Legislative Scrutiny and will engage with the Office of the Attorney General in preparing the legislation for publication.
Minister for Health Simon Harris said “I am pleased that Government has approved this General Scheme of a Bill, which stands to positively affect family farm and business owners who are in or are going into nursing home care across the country.
“This will make a substantial difference and finally remove the discrimination many of them faced under the existing law. I want to commend my colleague Minister Daly for his work to date on this issue. I would encourage political parties to work with us to pass this legislation as a matter of priority.”
However, the benefits will be applied retrospectively to anybody already in care or who enters a nursing home in the coming months. If a resident has been living in a nursing home for one year, their family will have to pay only the 7.5pc for another two years. Or if a resident is in a nursing home for more than three years, those 7.5pc payments will cease immediately.
They will not be able to recoup contributions they have made beyond the three-year cap period.
The Government has also noted that, as the law currently stands and will continue to stand, farm and business assets (along with all other assets) are not considered under the financial assessment in the Scheme if they have been transferred to others, including the next generation, over 5 years before nursing home care is required, making this the most financially prudent approach.
The State spends almost €1bn a year providing nursing home care to older people through the Fair Deal scheme.
This figure is expected to rise substantially in the coming years due to the country's ageing population.
Under Fair Deal, a person pays 80pc of their total income, such as a pension, to help fund their care.
On top of this, they commit 7.5pc of the value of their assets as a yearly contribution, capped at 22.5pc after three years.
Reform for the business sector has been slow due to the legal complexity of the scheme.
The Department of Health also recently cited Brexit as a reason for the delay.
It's understood the memo being brought to Cabinet today says the main policy objective is to protect the viability of family farms and businesses where there is a clear intention that it will be passed on to the next generation.
This is why an applicant must demonstrate at the time of entering a nursing home that the intended successor is prepared to take on the work.
The successor will not be required to work exclusive on the farm or in the business - but the expectation is that at least 50pc of their working week would be focused there.