My husband is in a retirement home under Fair Deal – would I be crazy to sell our house?
I live alone in the family house. My husband is in a retirement home. I was going to sell the house and move into a retirement home.
I never thought of Fair Deal, which we use. I started reading about the sale and the tax implications. Am I right in thinking that I would be crazy to sell? He has been in a retirement home for 2½ years.
Are there any tax implications after his death if I wait until then to sell the house, or Is the Fair Deal over after his death regarding the tax implications? I am alone but I really appreciate your advice.
Ms. JO, email
You are right to consider the implications of selling the family home if your husband is availing himself of the Fair Deal. However, that does not necessarily mean that you are “crazy to sell”. You also need to consider your own priorities in terms of wanting to move into a retirement home – and how it will be funded.
Fair Deal – which is the funding mechanism for most people in nursing homes in Ireland – sets the cost of care at 80 percent of income plus 7.5 percent of the value of assets per year for one person alone, regardless of the actual cost of home nursing care. The government finances the balance.
In terms of assets, the family home is capped: the 7.5% contribution only applies for the first three years of custody.
For a couple, like you, contributions are reduced by half: 40% of income and 3.75% of contribution from assets, including family housing. A nursing home loan covers the money owed on the house, and the house will generally not be sold until not only the resident of the nursing home, but also their spouse or partner dies.
What is really important here, as far as you are concerned, is this three-year cap on charges against the value of the family home. At present, your husband has been in care for two and a half years. This means that from the middle of this year he will have an 11.25% charge on the value of the house.
He will never owe more than that on the family home unless it is sold.
But if it is sold, the HSE will correctly continue to charge 3.75% of the sale price each year for the remainder of its time in the retirement home.
The question of course is how long will this continue, and the answer, for most of us, is we don’t know. The average stay in a nursing home is around three years, but a significant number of people will live longer – others less than this average.
There is therefore no upper limit to the 3.75 per cent annual burden on savings and investments. This is important because you have to figure out how to afford to move into a retreat center the way you want.
It would be one thing if you could buy the accommodation in the center because from what I understand then it would not be included in the bill for a nursing home. But most retreat centers rent or lease their units. This means that you will need a stable income, or savings, to keep paying the payments.
If your husband’s care eats away at all the savings – including those from the sale of the family home – this could eventually become a problem.
But before you dismiss the idea, remember that its load is 3.75 percent per year. He would need to live in the retirement home for a long time to start eating half the money from the sale of the property.
So the numbers can still work for you.
Sell the house
You also ask about the impact if you decide to wait until his death and then sell the family home.
There are two things to know here. First, once he dies, no further charges build up against his property. So if the family home is unsold until his death, the cap on what the HSE can take is 11.25%.
The second thing to note is that although usually a retirement home loan is not called against a family home until the death of the surviving partner, if the property is sold and the full amount is not used for invest in another home, chances are the HSE will want their money after the sale.
Which is not a good reason not to do it; just be aware that the bill will likely be due at that point. But it will be capped at 11.25 percent.
One of the main reasons people care about the Fair Deal is the burden on the family home and concerns about the cost of care weighing on the inheritance.
I have little tolerance in this area. A couple’s assets are theirs – to use them to make their lives as comfortable as possible and to meet their bills when they have run out of earning capacity.
It’s good that there is a cap on a family home and that leaves something for other family members, but your priority should be to organize your life the way you want it to.
Selling the family home will open up its value to the expense of a retirement home, but if it also allows you to live in a retirement home as you would like, then it’s a perfectly valid decision.
Please send questions to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email [email protected] This column is a reading service and is not intended to replace professional advice. No personal correspondence will be exchanged