Our property finance expert answers your questions
The short answer is not specifically.
While fees paid privately to a nursing home (or any contribution toward fees via Fair Deal) are allowable against the income tax bill of the payer, they are not then again allowed as a deductible against a future inheritance (Capital Acquisitions Tax) charge.
The income tax relief is generous, at the marginal (i.e. highest) rate of the bill payer, however it is worth mentioning that many pensioners do not pay tax at all, or pay it at the lower 20pc rate, which means they either cannot get tax relief, or only at the lesser rate.
This is why very often adult, higher-earning children pay the bill for parents.
In lieu of all of that, there is nothing stopping someone leaving a sum in their will to compensate for the additional cost of providing elder care.
So, for instance, a parent could specifically leave an instruction that their son is to be left X amount to cover the bill he has paid for on their behalf. This is notwithstanding the maximum tax free threshold for any Group A (children) disponee allowable overall is still €335,000.
We have a daughter with intellectual disability. While she is very capable of going to her job and attends a day centre several times a week, we worry about her future. We have two other children as well and all are aged in their 30s and 40s.
What we would like to do is leave our house to the three of them, with this daughter being allowed to stay there for the rest of her life and have made a will to that effect.
She won’t be able to live alone, but we have asked our other children to arrange a companion for her. Our query is, what is the effect on inheritance tax for them and also, if my husband or I need Fair Deal in the future, what would happen to the house?
You have a lot of issues going on here, and I can see you absolutely have everyone’s best interests at heart, but if I may suggest – you could be trying to juggle too many balls seeking a perfect outcome, possibly at the expense of a good one.
Let’s unpack the separate queries: it’s difficult from your email to know how much support your daughter requires, but it seems significant if she requires someone living with her full-time. Therefore, your wish to leave her the house she has grown up in to live in for the rest of her life is admirable, and probably comforting to you as her parents, and her as a dependent adult.
However, what you propose, which is called a ‘life interest’, is at the expense of your other children’s timely inheritance, unless this particular child has a particularly life-limiting condition.
As they are all similarly aged, it is hard to see otherwise how your other children can access their entitlement to your estate, if the house is the biggest asset, while your dependent daughter remains there for the rest of her life. Indeed, given she will require live-in support, it could end up eating up the rest of the money.
So, while you can certainly do what you propose – there is no requirement in Irish law for you to equally leave assets or apportion your estate in any particular way – it may be simpler to leave her the house entirely, with sufficient income to provide for a paid carer.
This may mean, depending on your circumstances, that your other children do not share in this bequest, but can of course be left other assets in lieu. They may be perfectly fine with that, but I can’t see that you can have it both ways: you cannot leave and not leave them the house at the same time.
Indeed, this daughter may be exempt from inheritance tax at all, since according to taxback.com, she could be in a position to avail of Dwelling House Relief, which can be claimed if the house continues to be her main home for at least six years after you pass away and it is her only or main residence for at least three years prior.
“Based on the above, the exemption is available to life tenants of a qualifying dwelling house, and the exemption does not cease if a life interest expires within six years of the date of the inheritance”.
On the Fair Deal issue, under the Ancillary Loan Scheme, the contribution on the family home (max 22.5pc over three years) can be deferred until the owner(s) passes away or the property is sold.
Peter McElroy of Fair Deal Solutions says while there is no specific exemption for this charge, under the legislation, “a relative in receipt of a disability or similar allowance, blind person’s pension, or the State pension (non-contributory), or whose income doesn’t exceed the State pension (contributory)” would provide an exemption.”
A visit to a solicitor with your other children would be a great idea now, I believe.
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