ARF v Annuity......Fair Deal implications

Slim said:
But that's how the private pension works. It earns interest/dividends and these are drawn as income, hopefully while preserving the capital. A pension schemes produces 'income'.
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No, that's not how ARFs work.

There's no requirement or ability to limit withdrawls to interest/dividends (i.e. income) earned on your ARF.

An ARF may or may not produce income, gross or net of costs. It may equally incur losses.

Regardless, apparently withdrawals are treated as income for the purposes of the Fair Deal assessment.
Slim said:
Question arises as to why anyone would draw down any income while in à nursing home!
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Because you have no choice in the matter. You are required to withdraw 4/5/6% from your ARF on an annual basis depending on your circumstances.

Regardless of the fact that your ARF may have incurred a loss in that particular year.
 

I agree with you but an ARF is not a deposit account. It's a pension scheme which generates income. As you draw down income, it's taxed which a deposit withdrawal would not be.
 
@Slim

I think we're starting to go around in circles here.

An ARF may very well be 100% cash. It might or might not generate income/gains, net of costs, in any given year.

I've no problem with income generated by an ARF being treated as such. My problem is that capital drawn from an ARF is treated as income in circumstances where it has already been assessed as an asset.

If an ARF was treated simply as a pension/annuity there wouldn't be a problem.
 
Where large assets are in play it might be best to pay for nursing home care yourself, and gift them to family where you might be paying less tax overall then that asset being in the fair deal scheme and taken at 7.5% every year for the lifetime of the person in care. Only the family home is limited to 3yrs everything else isn't.

Nursing home fees are about 80-100k a year. With 2 million you could pay that for until transfer of assets are excluded from the Fair deal back dated period (5yrs?)

You have to be practical. How long is the person likely to live for. How much income will they need in a nursing home.
 
As for ARF maybe ask revenue for classification. Fair deal is HSE but I don't get the feeling anyone with a lot of assets uses it.
 
So after 20+ posts, we don't even know all the rules here! Pretty difficult to work out best strategy without knowing the rules!
 
It would be more correct to say. We know the rules. We just don't agree with them.

The fair deal is really only designed for people with no assets other than their home to contribute to their costs.

Once you have more assets than that, the FD scheme requires some planning. For example it would be stupid to sell the primary home and leave the proceeds in a bank. As that will cost vastly more than not selling it.

So the example of having 2m in a fund that gives you income that you don't need. Is a little strange. Also people might live 3 months, 3yrs or 15yrs in a nursing home. The planning for each is very different.
 
Hi AlbacoreA,

I'm not sure that we definitively "know" the rules in respect of ARFs. There has not been uniform acceptance of the precise terms. Can you authoritatively answer the following!

If I have €500k in my ARF:

1. What is my capital assessment each year?

2. How is this amount paid to the HSE. If, for example, 7.5% of the fund is liable and is calculated as €37,500, how precisely is this amount paid? Do I withdraw €37,500 from the ARF and pay tax on it? Do I then treat this €37,500 as a nursing home expense and claim the tax back? What are the PRSI/USC implications here?

3. How is the income element on the ARF calculated? How is the imputed distribution treated?

My sense is that when we know this, it will help clarify the best strategic approach at an individual level based on current rules.
 
Its assessed at 7.5%
But pay €37,500 after tax. That will be the invoice. You then reclaim what you can from revenue.



Consider if was a NPR property you would pay CGT, fees etc. Then out of whats left pay €37,500. Then the balance would be assessed at 7.5% the following year.

The actual Nursing home fees will be 80-100k. So the state will be paying the difference.

Maybe I'm mistaken if so someone please correct me.


https://www.askaboutmoney.com/threads/arfs-and-the-fair-deal-scheme.204507/
http://myfairdeal.ie/?page_id=133
 
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Hoping to give this a bump!

So, when we submitted fair deal info, my Father was 62. He has an income from his then job. He owed €200k on a property then worth €120.

When he reached retirement age, we opted for an ARF rather than an annuity. We paid off the mortgage.

We mailed the fair deal folks a number of times, but got no reply.

We recently passed at 69, so he had an ARF asset for 4 years.

Any idea if they will reassess some or all of the fair deal calculations.
 
Sorry for your loss.

I would expect so. They basically send you an invoice. We had a couple of adjustments and a bit too and fro with it.
 
AlbacoreA said:
Sorry for your loss.

I would expect so. They basically send you an invoice. We had a couple of adjustments and a bit too and fro with it.
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TY.

Any idea if the adjustment will consider the ARF from when it arrived. I.E - he was in the home for 3 years before the ARF came into existance.
 
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