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Couple approaching 80s looking to reduce Fair Deal exposure

Q&A: Transferring properties to family members will lower what you pay for nursing home care but only if five years have passed

No one wants to consider the possible need for nursing home care but it can pay to plan ahead. Photograph: iStock

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Dominic Coyle Deputy Business Editor
Tue Feb 13 2024 - 05:30

My wife and I are heading towards our 80s and becoming more aware of what’s ahead. We own three properties, one being a holiday home in a university town which we are keen to hold on to, especially as grandchildren may opt to use it for third-level studies. Another house is rented out. That can be passed on to a son who is under the threshold.

With Fair Deal in mind, is it possible to sign over the university property to our six grandchildren, who are aged between 10 and 16, as they well may be the main beneficiaries and would it be taken into consideration in the Fair Deal schedule?

Mr M.B.

Planning for the future always makes sense but it can be a little tricky when you are dealing with children under the age of 18.

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Timing is also important and maybe we should look at that first.

Under Fair Deal, where the State agrees to subsidise the cost of long-term nursing home care where it is needed, the resident is required to contribute a portion of their income and the value of their assets over a certain threshold to that care.

When they do that, they also conduct a lookback assessment. Well actually, they simply ask you to disclose whether you have disposed of any assets by gifting them in the five years before your application.

If you have given away or sold assets in that window, Fair Deal will require a market valuation for the assets at the time they were disposed of and it will then conduct a clawback – effectively assuming you still own them for the purposes of assessing your financial position for Fair Deal.

When you respond, you need to be aware that this is part of a legal contractual arrangement: if you have indeed gifted or sold assets in the preceding five years, it’s not something you can simply not mention.

For you, this means that even if you were to transfer these two properties to your son and to your grandchildren today, you would need to hope that you do not need to avail of Fair Deal until at least February 2029 when you will both be well into your 80s.

That may well be the case, of course, but it is impossible to look that far into the future and be certain that health issues will not arise that leave you exposed to clawback, requiring you to pay money on properties you no longer own.

And it can impact on whether you qualify for Fair Deal at all. Where the financial contribution you are required to make as assessed by the HSE (and including the 7.5 per cent assessed on the value of assets you no longer own because you got rid of them within the previous five years) exceeds the actual cost of the care, a Fair Deal application will fail: essentially, the HSE cannot sign you up to an arrangement that would cost you more than simply paying the private nursing home charge upfront yourself.

I mention that only because, with three properties, you might find yourself close to the limit, depending on their value and on any other assets and income that you have.

Even if you were to start the transfer process now, it would be several months realistically before any asset transfer would be complete, pushing out your five-year deadline.

Assuming you pass the five-year window before needing to look at Fair Deal, there is little issue with the transfer of the rented property to your son as long as you are correct that its value will not bring him above the €335,000 tax-free threshold on gifts and inheritances from parents to a child.

Remember, that in seeing where he stands, the market value of this property on the date of transfer will have to be added to any other financial support greater than €3,000 in a calendar year that he has received from either parent as an adult. If having done that, he is still below the €335,000 limit, fair enough – although he will need to notify Revenue when he is within 80 per cent of that limit (ie, when he has received cumulative benefits of €268,000 or more) even though no tax will be due from him until the €335,000 limit is reached.

Your plans for the holiday home in the university town is more complex. Children under the age of 18 cannot legally hold property in their own right. And all of these children are under that age: some of them will not be 18 for another eight years.

That means you will need to establish a trust to control the property until they become adults. And with six children becoming adults at varying points over the next two-eight years, you will certainly want to get legal advice on how any trust arrangement needs to be structured to protect the rights of each of the six grandchildren.

Another factor to consider is that the threshold for gifts and inheritances to grandchildren is much more modest than for children – just €32,500 – so they would each be facing a tax bill if this property was valued at more than €195,000.

And if any of them has already inherited or been gifted in excess of €3,000 a year – not just from you but from any grandparent, sibling, uncle or aunt related by blood – that will reduce the benefit they can receive from you here, lowering that upper tax free ceiling on the property.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice

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