# Some would be better off paying for their nursing home themselves instead of using Fair Deal Scheme



## Sarenco (17 Aug 2017)

Hi Brendan

While I don't want to derail this epic thread unnecessarily, I wonder would the two sons in your original example not be better off topping up their mother's income to pay the nursing home fees in order to keep her out of the FD scheme entirely?

As I understand it they would get tax relief on the fees and it would preserve the full value of their expected inheritance.


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## Brendan Burgess (18 Aug 2017)

So are these the right figures? I have substituted twofor1's estimate of €60k in costs as the more typical cost.








A few points in this example:

The children should pay the nursing home costs
They would be financially better off renting out the house - but if they choose not to, that is their choice.
We could go a step further. The mother should pay only around €6,000 of the nursing home fees herself and so use up her 40% tax bracket. The children should pay the rest.


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## twofor1 (18 Aug 2017)

Sarenco said:


> I wonder would the two sons in your original example not be better off topping up their mother's income to pay the nursing home fees in order to keep her out of the FD scheme entirely?



I cannot see any reason why this lady with a €700K house and annual income of €40K would not be in Fair Deal, she has nothing to lose, and potentially a lot to gain. Nursing home fees are deductible whether you are in under Fair Deal or not.

Certainly for the first 3 years this lady’s assessed contribution would be way more than her nursing home costs. But she should still be in Fair Deal as if she lives beyond 3 years the valuable house will be disregarded from her financial assessment.

If she is not in Fair Deal she will continue to pay in full. One of my relations recently passed away after been in under Fair Deal for 7.5 years.

If in under Fair Deal and this lady opts for the Nursing Home Loan, that element will be recouped after she passes. The amount she pays weekly based on her income will be tax deductible.

If in under Fair Deal and this lady opts not to avail of the Nursing Home Loan, the amount she pays weekly based on her valuable home and on her income will be tax deductible. She will also be leaving her house in its entirety with no charge against it.


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## twofor1 (18 Aug 2017)

Sarenco said:


> Well, she will have to contribute 80% of her net annual income (~€25k) and her estate will potentially lose up to 22.5% of the value of her house.
> 
> I'm not sure I understand this - will her estate not lose up to 22.5% of the value of her home (€157,500 at today's value)?
> 
> ...



In this lady’s case she is going to pay for her care in full for the first 3 years anyway.

After that if she is in Fair Deal the house will be disregarded and unless she has a lot of savings, her contribution should drop substantially.

If she is not in Fair Deal, she will continue to pay in full indefinitely.

If this lady does not have the funds to pay the part assessed on her home, then she can avail of the Nursing Home Loan, which would be repayable after her passing. Bear in mind no one will pay more than the cost of their care.

Anything they pay whether in the scheme or not is tax deductible.

She has nothing to lose by being in Fair Deal, but should she live beyond 3 years she has a lot to gain, as the house will then be disregarded.


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## Brendan Burgess (18 Aug 2017)

twofor1 said:


> No one pays more than the cost of their care.



Hi twofor1

While that is true, is it not the case that the children get tax relief if they pay it from their income, but they don't get any tax relief if it's reclaimed from the estate?

Is the following correct for the cost to the family for someone who stays 3 years in a nursing home.


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## twofor1 (18 Aug 2017)

This is the best way I can explain it;

If the lady in this case goes into a nursing home privately, she will pay €60K annually for each year she is in care (not just the first 3), she or her family, if they pay it, can get tax relief on this €60K.

If the lady in this case goes into the same nursing home under Fair Deal and doesn’t avail of the Nursing Home Loan, she will also pay €60K annually and she or her family, if they pay it, can get tax relief on this €60K, but after year 3 assuming her savings are not above 36K, the house will be disregarded and she will only pay €32K annually and get tax relief on this €32K.

There is nothing to lose, and if you live more than 3 years a lot to gain.


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## Brendan Burgess (18 Aug 2017)

Are you saying the following 

1) She pays €32,000 out of her own pocket
2) She is deemed to pay the other €28,000 although the HSE actually pays it. 
3) She gets tax-relief on the full €60,000 

But the tax-relief is completely wasted as she has no taxable income.  
Gross income: €40,000
less nursing home costs: €32,000 
Taxable income: €8,000
So she pays no tax. 

If her children pay it, they will be able to utilise the full tax relief. 

Brendan


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## Slim (18 Aug 2017)

Brendan Burgess said:


> Are you saying the following
> 
> 1) She pays €32,000 out of her own pocket
> 2) She is deemed to pay the other €28,000 although the HSE actually pays it.*no she pays the full 60k.*
> ...


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## twofor1 (18 Aug 2017)

No Brendan, I’m saying, looking at your table,

If the children pay the €60K without their mother being in Fair Deal, they can claim tax relief on this 60K.

If the children pay the €60K with their mother being in Fair Deal, they can claim tax relief on this €60K.

Tax relief is available on either Private or Fair Deal, I don’t think your table takes this into account.

The advantage of Fair Deal though is the house is disregarded after 3 years, whereas if one is not in Fair Deal one is paying full price indefinitely.


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## Brendan Burgess (18 Aug 2017)

OK twofor1

She registers for the Fair Deal, but  the HSE doesn't pay anything or lend any  money. 

If so, then the correct thing for people to do is 
1) Register for the Fair Deal immediately
2) The children should pay most of the nursing home fees. 

Brendan


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## twofor1 (18 Aug 2017)

Brendan Burgess said:


> OK twofor1
> 
> She registers for the Fair Deal, but  the HSE doesn't pay anything or lend any  money.
> 
> ...




Yes, and if accepted, she will then be in under Fair Deal.

The amount assessed will be more than the cost of her care, so she or her family will pay in full for 3 years.

Towards the end of year 3, she applies to be reassessed disregarding the house.


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## Brendan Burgess (18 Aug 2017)

Gordon Gekko said:


> How on Earth can the kids get tax relief and the Fair Deal monies?!



I think what twofor1 is saying is

1) You go into the Fair Deal Scheme but you don't actually get any payments. 
2) They pay the nursing home fees and get the tax relief. 

I find it hard to believe, but maybe, just maybe, it's designed like that.

Brendan


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## Gordon Gekko (19 Aug 2017)

I think that this point is interesting in the context of Brendan's example and other cases..."if you've been in a nursing home for 3 years and then apply for Fair Deal, the 7.5% on your home doesn't apply."

So for the first 3 years of nursing home care, why not just claim tax relief on the €80k fee, resulting in an annual cost of €48k? Then enter Fair Deal which would make the fee €32k forever (i.e. 80% of the individual's income).

No €156,000 landgrab in respect of the house and the effective fee for the family capped at €32k forever.


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## Sarenco (19 Aug 2017)

twofor1 said:


> _‘’ If you have already been in a nursing home for 3 years when you apply for the scheme, then you do not pay the 7.5% on your principal residence.’’_
> 
> Can’t see this mentioned on the HSE or Dept of Health sites, but if this is up to date and correct, then there is probably no point in the lady in this case going through Fair Deal. Her sons can pay privately, get the tax relief and apply in 3 years time for Fair Deal.



Assuming the statement is correct, would it not be fair to say that it would be positively unwise to apply for the FD scheme until the lady in this case has been in a nursing home for three years?


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## twofor1 (19 Aug 2017)

Sarenco said:


> Assuming the statement is correct, would it not be fair to say that it would be positively unwise to apply for the FD scheme until the lady in this case has been in a nursing home for three years?



 Yes, that is what I have said in my post that you have quoted.


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## Sarenco (19 Aug 2017)

twofor1 said:


> Yes, that is what I have said in my post that you have quoted.



Well, no, you said there was "probably no point" in going through the FD scheme, which suggests that it probably doesn't matter much either way.

What I'm asking is whether the family in question would actually be better off opting not to avail of the scheme, at least until the mother has already spent three years in a nursing home?  Or to put it another way, she would have little to gain and potentially a lot to lose by availing of the scheme - which I believe is the opposite of what you originally said.

Apologies in advance if I have misrepresented your position.


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## twofor1 (19 Aug 2017)

Sarenco said:


> Well, no, you said there was "probably no point" in going through the FD scheme, which suggests that it probably doesn't matter much either way.
> 
> What I'm asking is whether the family in question would actually be better off opting not to avail of the scheme, at least until the mother has already spent three years in a nursing home?
> 
> Apologies in advance if I have misrepresented your position.



Well yes, I did say probably.

 If what Citizens Information says is right it probably doesn’t matter much either way.

On further reflection though, if it was me, I think I would stick with the Fair Deal option, as it is likely the 7.5% contribution on income and assets and the 3 year cap will be increased, if I am in the system now I will avoid these increases.

No need for apologies.


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## Sarenco (19 Aug 2017)

Thanks for the clarification twofor1.

So you are not saying it would be positively unwise to avail of the scheme.

You are saying that it probably doesn't matter much either way but, on balance, you would opt into the scheme on the basis that it might provide some protections from possible future changes to contribution levels.  Right?

So you disagree with Gordon's analysis below - is that correct?


Gordon Gekko said:


> So for the first 3 years of nursing home care, why not just claim tax relief on the €80k fee, resulting in an annual cost of €48k? Then enter Fair Deal which would make the fee €32k forever (i.e. 80% of the individual's income).
> 
> No €156,000 landgrab in respect of the house and the effective fee for the family capped at €32k forever.



Sorry to sound nitpicky but I think it's an important distinction in the context of this discussion.


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## twofor1 (20 Aug 2017)

Sarenco said:


> So you are not saying it would be positively unwise to avail of the scheme.
> 
> You are saying that it probably doesn't matter much either way but, on balance, you would opt into the scheme on the basis that it might provide some protections from possible future changes to contribution levels.  Right?
> 
> So you disagree with Gordon's analysis below - is that correct ?




I would not use a phrase like ‘’Positively Wise or Unwise’’ on AAM, the reason being this is a discussion forum where people share their view’s and knowledge, often opinions change after hearing what others have to say.

I think at the moment anyway, I would probably stick with the Fair Deal option.

I agree with Gordons analysis. But I can’t see anything in it that would make it more advantageous to be in privately rather than Fair Deal.

If I am missing something, or if you know some reason why it would be more advantageous to go private first, why not just tell us.


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## Brendan Burgess (21 Aug 2017)

twofor1 said:


> I cannot see any reason why this lady with a €700K house and annual income of €40K would not be in Fair Deal, she has nothing to lose, and potentially a lot to gain. Nursing home fees are deductible whether you are in under Fair Deal or not.



Hi twofor1

This was your first contribution on the issue. It seems to me to be plain wrong.  

The sons can get tax relief on the money that they pay for her care. 

She gets much less tax relief. 

She can claim the full amount paid by her, but lent by the HSE. 

The sons cannot claim tax relief on the amounts paid by her and lent by the HSE. 

The purpose of this thread was to make it easy for people to understand the best approach to the Fair Deal scheme. 

We all get stuff wrong and, if you have got it wrong, it would be  very helpful if you acknowledge that you have got it wrong.  I will go back and edit the thread to make it readable for others. 

Brendan


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## Slim (21 Aug 2017)

I think the title of this thread, i.e Some people would be better off opting out of the Fair Deal scheme, is correct in spirit but should be re-phrased as ' _Some people would be better off paying nursing home fees themselves even after having been approved for the Fair Deal Scheme'.
_
At the values quoted above, the lady in question and her family are clearly better off out of FD. However, this assumes that all variables remain unchanged, i.e. government changes to the FD scheme, in particular the assessment of value/length of PPR contribution, the issue of whether the lady's income will rise, government tax policy, the rising cost of nursing home fees, not to mention her life expectancy.

In the light of this, twofor1 is absolutely correct, the lady should apply for FD, hopefully get approved but pay the full cost of her care for a few years and, if the conditions change against her, opt in to NH support from FD.


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## Brendan Burgess (21 Aug 2017)

Slim 

Has it been established that one can seek approval and then not pay your own fees?  

It has been asserted, but I don't think anyone can provide a link to this? 

The main point that Sarenco made is that some people should pay their own fees.  If we make it too complex, then that point might well be missed.

Brendan


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## twofor1 (21 Aug 2017)

Brendan Burgess said:


> She can claim the full amount paid by her, but lent by the HSE.
> 
> The sons cannot claim tax relief on the amounts paid by her and lent by the HSE.



Hi Brendan,

In the specific case we are discussing there is no money lent by the HSE.

My understanding is we are talking about a lady who has a house worth €700K, and an annual income of €40K and assuming she has savings below the €36K threshold.  Her family are in a position to pay on her behalf and fully avail of the tax reliefs.

If this lady goes into a nursing home privately the cost is €60K annually, the net cost after tax is €36K.

If this lady goes into a nursing home under Fair Deal* and has opted not to avail of the Nursing Home Loan,* her assessed contribution is more than the cost of her care so the €60K is paid without any contribution or loan from the HSE. The net cost after tax is also €36K.

I hope this clarifies my position.


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## Brendan Burgess (21 Aug 2017)

OK, it clarifies it that she is clearly better off paying for it herself than letting the HSE pay for it. Which was Sarenco's main point.

That's great. 


Brendan


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## twofor1 (21 Aug 2017)

Brendan Burgess said:


> Slim
> 
> Has it been established that one can seek approval and then not pay your own fees?
> 
> It has been asserted, but I don't think anyone can provide a link to this?



Under Fair Deal, if your assessed contribution is more than the cost of your care, you or anyone else on your behalf can pay the cost of care in full for the first 3 years. You do not have to avail of the Loan.

 Thereafter you will only pay the amount assessed on your income and other assets (if any), ie excluding the family home. This is because after 3 years under Fair Deal the HSE will disregard your principal private residence from further assessment.

Your local Nursing Home Support office will confirm if you give them a ring.


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## Brendan Burgess (21 Aug 2017)

I have deleted all the posts which were off the core topic or which were later corrected as they should be all covered in the summary below:

If anything is unclear, please ask again.






1) Because the resident or their children get tax-relief on their payments for nursing home care, in some cases, they will be better off paying it themselves than relying on a loan from the HSE.


2) They should, however, register for the Fair Deal Scheme as soon as they enter the Nursing Home, because after three years, their home will be ignored by the HSE in conducting a means test. (Although there is no independent verification of this.)

Cost to the family after the first three years: 




3) There is no disadvantage in registering for the Fair Deal Scheme when you first enter the Nursing Home, even if you are not seeking a contribution to the fees from the HSE.  (There may or may not be any advantage either.)

*Clarifications *
A) Anyone paying nursing home fees can claim tax relief on the payments - that could be the resident, their children or even a friend who is not related.
B) Only the person paying the actual nursing home fees can claim the tax relief on them.  If the mother pays the fees, the children cannot claim tax relief.
C) If the HSE lends the money to the resident to pay the fees, that resident can claim tax relief on those payments (although this is probably irrelevant as she would be paying no income tax anyway.


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## Slim (21 Aug 2017)

Brendan Burgess said:


> Slim
> 
> Has it been established that one can seek approval and then not pay your own fees?
> 
> ...


Maybe you have mistyped the question? If you're approved, you can avail of the scheme and pay the assessed contribution. The HSE will pay the balance, if any. Obviously, if your assessment is greater than cost of the nursing home, you'd be daft to go this way. You can get approved but then 'no one pays more than the cost of their care' applies, so you pay your own fees and if, at a later date, your income/assets decline or the rules change, you are already approved for the scheme and the scheme will ensure you are no worse off and maybe better off in some cases.


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## Brendan Burgess (21 Aug 2017)

Sorry Slim, I don't follow that at all. I thought that post no 34 clarified it.

Is there still some lack of clarity? 

The right strategy is 
1) Get approved for the Fair Deal Scheme 
2) But, despite the HSE agreeing to pay some of your fees, your children should pay them instead. 



Slim said:


> Obviously, if your assessment is greater than cost of the nursing home, you'd be daft to go this way.


Not sure what you mean by this. 
If I am assessed at being able to pay €70k, but the nursing home charges only €60k, I pay the €60k and not the €70k

Brendan


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## Brendan Burgess (21 Aug 2017)

OK, I checked with the HSE and they told me that the three years starts after you go into the nursing home. It's not three years after you go into the Fair Deal Scheme. 

They referred me to page 5 of their [broken link removed]
_Your principal residence will only be included in the financial assessment for the
first 3 years of your time in care. This is known as the 22.5% or ‘three year’ cap
(15% if application was made prior to the 25th July 2013). It means that you will
pay a 7.5% contribution based on your principal residence for a maximum of
three years regardless of the time you spend in nursing home care. After 3 years,
even if you are still getting long-term nursing home care, you will not pay any
further contribution based on the principal residence. This ‘three year’ cap applies
regardless of whether you choose to opt for the loan or not (see section 5)._

So when you enter a nursing home, apply for the Fair Deal Scheme.

They will assess your means as : 

80% of €40,000 = €32,000
7.5% of €700k = €52,500 
Therefore, State Support is zero. 

After three years, the house is ignored. 

And the state support will be €28,000 a year. 

There is no disadvantage in applying for the Fair Deal Scheme, as long as you pay the full amount between yourself and your family.

There may be an advantage if you apply now and the rules tighten up later.

Brendan


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## Early Riser (21 Aug 2017)

Brendan Burgess said:


> If the HSE lends the money to the resident to pay the fees, that resident can claim tax relief on those payments



This is the piece I do not understand. The resident can (technically) claim tax relief on the Nursing Home Loan?


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## Brendan Burgess (21 Aug 2017)

Why do you not understand that? 

The resident cannot claim tax relief on the state support as the HSE pays it. 

But the resident pays the full cost - they just happen to be borrowing the money. 

Look at it like this.  Let's say that the resident borrowed the money from the Bank of Ireland. It's clear that they are paying the fees.

Brendan


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## Andarma (21 Aug 2017)

I don't think the table in #26 is correct with regards to what the person would receive under Fair Deal. Their means would be assessed as 80% of their income (ie €32,000) plus 7.5% of the value of their house (ie €52,500), giving a total of €84,550. As the assessed means is greater than the cost of care, then  they will receive nothing under Fair Deal and will have to fully fund the cost of care, ie €60,000, themselves, either through family providing the money or through the homeloan scheme.


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## Brendan Burgess (21 Aug 2017)

Sarenco said:


> Assuming the statement is correct, would it not be fair to say that it would be positively unwise to apply for the FD scheme until the lady in this case has been in a nursing home for three years?



Just to make sure I understand this Sarenco. 

This was based on the assumption that if you were in the Fair Deal Scheme, the HSE would be paying the €28,000? 

In fact the HSE is not paying the €28,000 - the woman is. It's just that the HSE is lending the money to her. 

So it's not unwise to apply for the FD scheme. 

Brendan


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## Brendan Burgess (21 Aug 2017)

Andarma said:


> I don't think the table in #26 is correct with regards to what the person would receive under Fair Deal. Their means would be assessed as 80% of their income (ie €32,000) plus 7.5% of the value of their house (ie €52,500), giving a total of €84,550. As the assessed means is greater than the cost of care, then  they will receive nothing under Fair Deal and will have to fully fund the cost of care, ie €60,000, themselves, either through family providing the money or through the homeloan scheme.



But isn't that what the table says? 

Which line do you think is incorrect? 

Maybe the title is misleading? The Fair Deal Scheme does not pay the fees as such?  If I change that to "FDS - opts for the homeloan schme" would the table then be correct?

Brendan


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## Early Riser (21 Aug 2017)

Brendan Burgess said:


> Why do you not understand that?
> 
> Look at it like this. Let's say that the resident borrowed the money from the Bank of Ireland. It's clear that they are paying the fees.



I can't grasp that the HSE "loan" is the equivalent of a bank loan. The HSE is repaid the "loan" by the contribution of (up to) 7.5% value of the PPR for up to 3 years. For many people this will not repay the loan. If the person in this example stayed in care for 10 years it would not repay it here either.

I had understood that, although called a "loan", this is a misnomer. It is actually a "scheme" by which the HSE pays the money on behalf of the resident and in return places a claim on the PPR. Therefore, if the tax can be reclaimed it would (technically) be the HSE who could reclaim it.


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## Andarma (21 Aug 2017)

Brendan Burgess said:


> But isn't that what the table says?
> 
> Which line do you think is incorrect?
> 
> ...



The 3rd line 'Fair Deal Scheme' and '€28,000' is incorrect IMO. It implies that the person is eligible to receive €28k under Fair Deal, when in fact they are not eligible to receive anything. The line setting out the person's assessed contribution towards their care is also incorrect - it needs to show the 7.5% of the value of the house in  addition to 80% of their income.

To make up the shortfall between the 80% of income and the cost of care, the person needs to come up with €28k from  family or from the loan scheme, ie the ancillary state support scheme. For the loan option, the HSE effectively pays the difference and it is reclaimed from the estate of the individual at a later date.


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## Brendan Burgess (21 Aug 2017)

Andarma said:


> The 3rd line 'Fair Deal Scheme' and '€28,000' is incorrect IMO.



OK

I see the problem now. Thanks for pointing it out.

I will think about how best to lay it out. 
The State Support for the first three years is nil. 

However, they can borrow the money from the HSE on the strength of their house. 

I see that the table suggests that the HSE is paying it. It's not. It's just lending it to the resident.

Brendan


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## Brendan Burgess (21 Aug 2017)

Early Riser said:


> I had understood that, although called a "loan", this is a misnomer.



No. It's actually a loan. Wait until I do the revised tables, which will probably be tomorrow and it should be clearer. 

This is a bit like my attempts to explain the Shared Ownership scheme, which no one understood or, if they did, they could not explain it.

Brendan


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## Andarma (21 Aug 2017)

It is not a loan in the traditional sense - the HSE pays the money to the nursing home and recoups it from the estate at a later date. Section 5 on page 8 of this document explains it:

http://health.gov.ie/wp-content/uploads/2014/04/Frequently-Asked-Questions.pdf


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## Brendan Burgess (21 Aug 2017)

Hi Andarma

It's a loan in every sense of the word. 




It's a secured loan - secured on the resident's property.
The interest is the rate of inflation. 

I think that is where I got confused at first. I understood the general public view that the HSE pays 7.5% of the value of the property in nursing home fees and then recoup them.

No they don't.  The resident pays the actual shortfall.  The HSE lends the amount to the resident.

My table tomorrow should clear it up.

Brendan


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## Early Riser (21 Aug 2017)

Brendan Burgess said:


> No. It's actually a loan. Wait until I do the revised tables, which will probably be tomorrow and it should be clearer.



Ok Brendan. I look forward to the Table - and remain perplexed in the meantime. Can you take the following into account also? -

_54 Can I repay the loan to the HSE instead?

No. Under the legislation the loan 
must be repaid to the Revenue 
Commissioners. _


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## Brendan Burgess (21 Aug 2017)

Not sure that it's particularly relevant? The HSE gives you the money, but you repay it via the tax system as people are more likely to repay it that way.

brendan


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## Early Riser (21 Aug 2017)

Brendan Burgess said:


> Not sure that it's particularly relevant? The HSE gives you the money, but you repay it via the tax system as people are more likely to repay it that way.
> 
> brendan



Brendan, You are correct. I just thought that tax relief for the HSE loan was too strange to be true, but it seems that it is. I just had a read of Ch 6 of the attached :

http://www.revenue.ie/en/tax-profes...ains-tax-corporation-tax/part-15/15-01-12.pdf


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## Sarenco (21 Aug 2017)

Brendan Burgess said:


> Just to make sure I understand this Sarenco.



To be honest Brendan, I was just trying to make sure I grasped twofor1's point - it wasn't meant to read as a rhetorical question.

I still find the idea being admitted to a scheme but then not accepting any payments under that scheme a bit odd.  

However, I very much take twofor1's point that there is no requirement to apply for ancillary state support (aka the nursing home loan) once admitted to the FD scheme.


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## Brendan Burgess (21 Aug 2017)

Sarenco said:


> I still find the idea being admitted to a scheme but then not accepting any payments under that scheme a bit odd.



I found it very very odd as well, but that is not really the way to look at it. 

Admission or not to the Fair Deal Scheme is irrelevant. 

Your home is excluded three years after you enter the nursing home. Not, as I originally assumed, three years after you enter the Fair Deal Scheme. 

So if your means are going to be in excess of the cost of the nursing home, don't bother applying for the Fair Deal Scheme for the first three years. (Unless you think that by being in, you will not be affected by any later tightening of the scheme.) 

Brendan


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