Monday 20 November 2017

How to avoid the financial panic of nursing home bills

Illustration: Tom Halliday
Illustration: Tom Halliday
Louise McBride

Louise McBride

MOST of us dread the thought of going into a nursing home – or of sending a beloved parent into one. The bill doesn't make it any easier. It could cost more than €70,000 a year for a bed in a nursing home.

If you're overwhelmed by the bill you could face for nursing home care, remember that you should qualify for financial support from the State. Under the Government's Fair Deal scheme, you pay a contribution towards the cost of your nursing home care and the State pays the balance.

* Fair Deal: who qualifies?

You must need long-term nursing home care to be eligible for Fair Deal – and a healthcare professional will assess you to determine this. If you only need short-term care, such as respite, convalescent or day care, you won't qualify.

You will be eligible for the scheme regardless of the type of home you choose – that is, whether it is a public, private or voluntary home.

If your parent or relative needs nursing home care but is of "diminished mental capacity", you can apply for Fair Deal on their behalf.

* How much will I pay?

If you get the go-ahead for Fair Deal, the Health Services Executive (HSE) will look at your income and any assets you own to decide how much you should pay towards the cost of your care.

Under Fair Deal, you contribute up to four-fifths of your income and 7.5 per cent of the value of your assets a year – with the HSE picking up the rest of the tab. You don't have to own property to qualify for Fair Deal. Income alone, even if it is simply the State pension, will be taken into account. Income can include any earnings, pension, social welfare benefits, rent – or any income which you have deprived yourself of within five years of applying for the scheme.

The first €36,000 of your assets (or €72,000 if you are married), will not be counted when deciding how much you should pay towards the cost of your care. Assets can include property, land, savings, stocks and shares. If your only assets are land and property, you can defer using these assets to pay for your care until you die.

If you are married or in a civil partnership and your partner is still living at home, your partner will still have money to live on should you go into a nursing home through Fair Deal. Under the scheme, only half of the income or assets of you and your partner will be taken into account when determining how much you should pay towards the cost of your nursing home.

There is a limit to the extent that the family home can be used to fund the cost of your nursing home. If you spend more than three years in a home, no more than 22.5 per cent of the value of your family home can be used to pay for your care – or 11.25 per cent if you are a couple and your partner remains at home. In some cases, the same cap will apply to family businesses or farms.

You shouldn't pay any more for your care than it costs – but understand exactly what is covered by Fair Deal.

"People are under the impression that Fair Deal covers everything – it doesn't," said Tadhg Daly, chief executive of Nursing Homes Ireland (NHI), a lobby group for private and voluntary nursing homes. "It doesn't include things like hairdressing, therapies, newspapers and other activities."

Fair Deal covers your bed and board, laundry, nursing and personal care, and basic aids and appliances.

* Can I move into the nursing home straight away?

Once you get approved for Fair Deal, you will usually have to wait until the nursing home has a free bed before you can move in. When asked how many people are on a waiting list for a nursing home, a spokeswoman for the HSE said: "We do not hold data on waiting lists on public and private nursing homes. An average wait for funding approval [for Fair Deal] is 25 days."

* What happens if I don't want to go for Fair Deal?

If you're very wealthy or are on a bumper pension, you might not want to go through Fair Deal when paying for your nursing home care.

"Everyone who needs nursing home care qualifies for Fair Deal – if they want to," said Eamon Timmins, spokesman for the older people's charity, Age Action. "However, it may not suit wealthy people. A lot of people don't want their estate tied up with the State."

If you're on a comfortable pension of €100,000 a year, up to €80,000 of that could be used to pay for the cost of a nursing home. You will never pay more than the cost of your care under Fair Deal.

However, given that the average private nursing home costs about €50,000 a year, you could end up footing most of that bill yourself under Fair Deal if you're on a comfortable pension – and you might not be willing to do so given that the State could have a stake in your estate when you die.

If this is the case, you can pay for your nursing home care yourself. Although the bill will be enormous, if you are still paying tax and are a higher rate taxpayer, you will be able to claim back more than two-fifths of the cost in tax relief – as you can get can get 41 per cent tax relief on nursing home expenses. If you are not a higher-rate taxpayer, you will only get 20 per cent tax relief on your nursing home expenses.

However, if you have a relative who is a higher-rate taxpayer, ask him or her to pay the nursing home expenses on your behalf – that way, the higher tax break can still be claimed. "It's important to have your tax affairs up to date before claiming the relief," said Larry Power, a Dublin financial consultant who specialises in advice for long-term nursing home care.

"If you're considering paying for your nursing home costs yourself, then fund as much of those costs out of your income as possible, rather than using your assets or savings – as income is allowable against tax."

Take whatever steps you can to protect your wealth and plan your inheritance before you go into a nursing home. For example, make a will and set up a power of attorney – where you appoint someone to take actions on your behalf should you become too ill to do so. "In the absence of a power of attorney, you could become a ward of court which based on my understanding, can be quite cumbersome," said Paul Dillon, tax partner with Dublin accountants, Deignan Carthy O'Neill.

* What happens if I'm asset-rich, but cash-poor?

If most of your wealth is tied up in assets, you could restructure your wealth at least five years before you expect to go into a nursing home – to avoid the State getting its hands on those assets when you die.

"The financial assessment for Fair Deal has a five-year look-back rule," said Gerry Higgins, tax partner with the Dublin chartered accountants, Cooney Carey. "This suggests that any wealth restructuring – including gifts to family and so on – needs to be put in place more than five years before you apply for Fair Deal. Otherwise, any assets or income divested within the five years are likely to be taken into account when calculating the individual's contribution to the cost of care."

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