Plan smart for your old age - and know how the deal works
With tax reliefs and 'nursing home loans', the HSE deal is well worth a look, says 'Money Doctor' John Lowe
Comedian George Burns, who lived past 100 years of age, once said whenever he would order a three-minute egg, they asked him for the money up front. Yes, this is living in the 21st century. We are all getting older, living longer, leading healthier lives. While there are 677,000 citizens over the age of 66 currently in Ireland, by 2050, there will be 1.8 million…and it costs.
Caring for our ageing citizens is certainly going to become not just a national pastime, but a serious task for these citizens and their families. Top of that caring list is finance. What is the best way to address this inevitable cost? Hope it will all work out when we arrive at that age? Or do what we should have done with our pensions all those years ago - plan at the start?
Currently there are a number of considerations when it comes to paying for potential nursing care in the twilight years before shuffling off this mortal coil:
1 You have your own mortgage-free home, a pension, the State pension and you may be even in the healthy financial position of being able to pay for your own in-house nursing care without State aid when or if you do become incapacitated.
2 You do not own your own home and live just on the State pension (€238.30 a week) but you have children who look after you physically and financially outside of your State pension.
3 You will need nursing home care for a variety of reasons and you now realise staying in your mortgage-free home is not practical.
What are the options if you cannot afford live-in expensive home help?
* Sell the home and simply pay a nursing home an average €1,325 a week (rate is for St Joseph's Crinken Glen, Co Dublin) until your money runs out…on an average €300,000 home, that's just under four-and-a-half years...and then, as Willie Nelson sang, "you're on the road again…"
* Take up the HSE's Fair Deal scheme…it's not all that complicated.
The Fair Deal scheme, brought into law on July 1, 2009, and introduced on October 27 that year, provides financial support to people who need long-term nursing home care.
The first step is an application for a care needs assessment - this identifies whether or not you need long-term nursing home care ie whether you can be supported to continue living at home or whether long-term nursing home care is more appropriate.
The second stage is then a formal application for the care scheme.
The level of nursing home cost, of course, will depend on location, the level of dependency required (you or your loved one might be totally incapacitated) and the actual standard in the nursing home chosen (eg purpose-built quality homes comprising mainly of single en-suite rooms can expect to charge higher fees).
Your income and assets will be subject to a financial assessment in order to work out your contribution.
Basically you contribute:
* 80pc of your total income;
* 7.5pc of the value of any assets per annum (5pc if the application was made before July 25, 2013).
However, the first €36,000 of your assets, or €72,000 for a couple, will not be counted at all in the financial assessment. Where your assets include land and property, the 7.5pc contribution based on such assets may be deferred and paid to Revenue after your death, known as the Nursing Home Loan.
Your principal residence will only be included in the financial assessment for the first three years of your time in care. This is known as the 22.5pc or 'three-year cap' (the cap is 15pc for applications made before July 25, 2013). This means that you will pay a 7.5pc contribution based on your principal residence for a maximum of three years regardless of the length of time you spend in nursing home care.
When you are approved for the Fair Deal, you will also be provided with the list of nursing homes that are participating in the scheme.
This list will include public nursing homes where you pay the assessed contribution to the HSE voluntary nursing homes and approved private nursing homes where you pay the assessed contribution directly to the nursing home. The HSE pays the balance of the cost of care to the private nursing home.
An individual may claim tax relief in respect of the costs (less any amount paid by a public or local authority, insurance scheme or other compensation) of maintaining a relative in a nursing home which has been approved by the health minister and children. Tax relief is available at the taxpayer's highest rate of tax (20pc or 40pc) and can be claimed by completing form Med 1. Relief can be claimed for expenses paid in each tax year, or for the year in which the expenses were incurred. Claims can be in respect of subscription year or tax year but must be consistent every year and relief is given by way of repayment at the end of the year. An individual may claim tax relief in respect of costs incurred relating to a relative or any other person who is either over 65 or permanently incapacitated by reason of mental or physical infirmity.
In cases of hardship, PAYE taxpayers may be given the relief through the PAYE system on a weekly or fortnightly basis, to help meet the cost, rather than waiting until the end of the tax year.
If part of the costs of the nursing home are shared with other family members or relatives, an individual may claim in respect of the portion or percentage paid by him/her. In some cases, the person residing in the nursing home may pay some of the costs from his/her own income and this can affect a claim. Before calculating the relief, any costs paid by the resident in the nursing home is deducted from the claim (or a maximum deduction of 60pc of the resident's income). For example:
If you maintain a dependent in a nursing home and claim relief in respect of the expenses totalling €15,000. Your dependent has an income of €8,000, which is available directly or indirectly towards the costs:
* Dependant's health expenses - €15,000;
* Dependant's income X 60pc - €4,800;
* Health expenses to be claimed by you - €10,200.
Better to plan now than leave it to the last minute. Of course you could take Woody Allen's advice that regular naps prevent old age, especially if you take them while driving.