Is disposing of assets to avail of the Fair Deal Scheme fair?

[Marsupial]

Moved from this thread

Avoiding the Fair Deal Scheme

Have been searching the forum for something similar..... and have a related question..... again with the intention of availing of Fair Deal in >5 year time .... and keeping taxes to a minimum. In our situation, "Dad" is very much alive and lucky enough to have a good amount of cash/savings...

www.askaboutmoney.com

Thanks again for replies, all very helpful.
As per initial post, the house is currently worth 300k, so nothing underhand being proposed.
Dad is 82 and is finding it difficult to spend his savings at this stage of life and his wishes are to avoid, where possible, the tax man (or Fair Deal) taking his hard earned life savings while his grandchildren struggle to start out on life's journey of starting a home etc.
300k in savings would mean Fair Deal would be a non-runner and the 300k would be gone in 4-5 years on Nursing Home fees. That's difficult for him to accept while his grandchildren are approaching the stage where 30K would make a huge difference in their lives.
His own children are "financiallv fine".

So he wants me (and others) to pay for his time in a nursing home instead! How very altruistic of him.

 

[T McGibney]

If Johnny owns it, any gains will be subject to CGT.

Not necessarily. It's possible in certain circumstances to claim PPR relief for a property occupied solely by a "dependent relative" on a rent-free basis.

 

[Dr Strangelove]

So he wants me (and others) to pay for his time in a nursing home instead! How very altruistic of him.

The players don’t make the rules.

The plan here is perfectly legal.

 

[Brendan Burgess]

So he wants me (and others) to pay for his time in a nursing home instead! How very altruistic of him.

I agree with you Marsupial. There is something wrong with the system whereby someone with €600k of assets can give them away and then get the rest of us to foot the bill.

 

[T McGibney]

I agree with you Marsupial. There is something wrong with the system whereby someone with €600k of assets can give them away and then get the rest of us to foot the bill.

It's no different from and as equally legitimate as tax planning. And there is no certainty that the man in question will ever use nursing home care. Most elderly people these days don't.

 

[Dr Strangelove]

There is something wrong with the system whereby someone with €600k of assets can give them away and then get the rest of us to foot the bill.

A bigger question is why an infirm individual is taxed for their treatment but no other type of medical condition incurs a tax.

The HSE could pay six figures on a novel treatment for a rare cancer and no one would consider it right that the HSE put a lien on the patient’s house.

 

[Protocol]

I presume there is a distinction between healthcare and long-term social care?

 

[hero25]

So he wants me (and others) to pay for his time in a nursing home instead! How very altruistic of him.

Yes, he wants you and me and his other children, via our taxes, to pay for him..... you could call it "re-pay" instead of "pay".
Apart from his old OAP, Dad or his children have never received a cent in welfare from the State. He is one of many of that generation who worked hard, paid their taxes, paid for their own house, educated their children, expected no handouts and saved hard.
Now, in his later years, he finds it hard to accept that his "neighbour", who may not have worked (ever), received free housing, medical card, free education etc and never saved a cent .... would be taken care of (rightly so) for free in their old age by the State (aka you and me).
While he would have to pay for the same care from his hard-earned life savings & potentially lose any money he had managed to save in his life. He believes his care should also be free.
It's a double-whammy and hard to argue against him!
If the system were fair, those of us who foot the bill now would avail of free care when our time comes...... rather than footing the bill now for our elderly citizens and footing the bill again when we ourselves are elderly.

 

[Annieindublin]

like most I can see both sides.

You do get fewer benefits throughout your life if you aren’t unemployed, disabled etc. And that continues.

However what galls is that two families with the same income, pay the same taxes etc… one spends and the other saves and the saver ends up paying for long term care.

But of course it’s about need. And we can’t predict what we will need in old age. Getting rid of savings and property to avail of state support makes financial sense it seems in this case.

But it seems morally wrong to me and I’m not sure why, maybe it’s jealousy as my parents would not dream of doing that. So if needed the fair deal will take a chunk of their estate.
They were savers all their lives and have a substantial bank account. Currently it’s being spent on care to keep them in their own home, long may that continue. Their kids aren’t in need, their grandkids.., well yes of course.., the 20/30 year olds could really use a hand but they aren’t going to get it.

I wish my parents had travelled more, treated themselves to better cars, got the house fixed up more often, eaten out more etc. But they didn’t and as a result they have money for home help and nursing homes if needed.

 

[Brendan Burgess]

I agree with you Marsupial. There is something wrong with the system whereby someone with €600k of assets can give them away and then get the rest of us to foot the bill.

It's no different from and as equally legitimate as tax planning. And there is no certainty that the man in question will ever use nursing home care. Most elderly people these days don't.

An interesting way of looking at it.

Not disposing of assets which have unrealised capital gains until you die is valid tax planning. ( BTW, I don't agree with this exemption from CGT.)
Making pension contributions is valid tax planning.

Disposing of all your assets so that you are impoverished and that you become fully dependent on the state. Seems much more artificial to me.

I would bring in conditions that any gifts given to children could be reclaimed to pay for a person's old age. Hard to enforce, but in this case, if they gave a gift of a house and the house still exists, the state should take the house to pay for the person's nursing home fees.

Passing on the family home and lots of wealth to your wife in her sole name and later claiming bankruptcy seems wrong to me - although the Official Assignee can go back some years. Sharing your wealth equally with your wife is ok.

 

[Annieindublin]

Can the fair deal scheme “look through “ recent disposals?

I think they can, I may be wrong there but is there some clawback where you dispose of your assets the day before you decide that a nursing home is needed v disposal a decade earlier?

 

[Brendan Burgess]

If he requires nursing home within 5 years, the assets would be regarded as his means.

Fair deal and clawback query, who pays clawback?

Hi My father may need nursing home care in the next number of years as he's in his 80s, he has an asset worth about 200K he wants to transfer to me. I was thinking about his long term care options if needed and read about the fair deal and the claw back/look back window of 5 years. If I'm...

www.askaboutmoney.com

 

[T McGibney]

Disposing of all your assets so that you are impoverished and that you become fully dependent on the state. Seems much more artificial to me.

That would indeed be artificial. In reality, nobody engineers their own destitution to avoid a contingency that may never materialise.

 

[Brendan Burgess]

But that is what was planned in the thread which gave rise to this discussion!

 

[T McGibney]

But that is what was planned in the thread which gave rise to this discussion!

No. There was no suggestion in that case that the father would be left destitute.

Its long been public policy that senior citizens should be encouraged to divest themselves of surplus assets particularly in advanced old age. The structure of certain tax reliefs, eg CGT retirement relief, reflects this.

 

[hero25]

Really good, balanced post earlier by @Annieindublin , the struggles of conscience most of us have over this type of situation are very well articulated.
At the end of the day, one does have to look after themselves and their family and make the decisions they believe are the right ones.

@Annieindublin I wonder if your parents had their time over again, would they have done it differently .....

 

[TRS30]

like most I can see both sides.

You do get fewer benefits throughout your life if you aren’t unemployed, disabled etc. And that continues.

However what galls is that two families with the same income, pay the same taxes etc… one spends and the other saves and the saver ends up paying for long term care.

But of course it’s about need. And we can’t predict what we will need in old age. Getting rid of savings and property to avail of state support makes financial sense it seems in this case.

But it seems morally wrong to me and I’m not sure why, maybe it’s jealousy as my parents would not dream of doing that. So if needed the fair deal will take a chunk of their estate.
They were savers all their lives and have a substantial bank account. Currently it’s being spent on care to keep them in their own home, long may that continue. Their kids aren’t in need, their grandkids.., well yes of course.., the 20/30 year olds could really use a hand but they aren’t going to get it.

I wish my parents had travelled more, treated themselves to better cars, got the house fixed up more often, eaten out more etc. But they didn’t and as a result they have money for home help and nursing homes if needed.

Can relate to a lot of this. Have been telling my folks for years to spend their money on themselves however it fell on deaf ears and I fear they are too old now.

 

[Brendan Burgess]

No. There was no suggestion in that case that the father would be left destitute.

Maybe I misunderstood the post.

He has a house worth €300k and €300k in cash. He proposes, in effect, to give the house to one of the sons and €30k to each of his grandchildren.

If I have understood it correctly, is that wrong or is it just good financial planning?

Edit: I am fairly sure that is what is proposed:

End result: Dad has disposed of his 300K cash and his house in tax efficient manner and in >5 years time has Zero assets for "Fair Deal".

Brendan

 

[Marsupial]

Yes, he wants you and me and his other children, via our taxes, to pay for him..... you could call it "re-pay" instead of "pay".
Apart from his old OAP, Dad or his children have never received a cent in welfare from the State. He is one of many of that generation who worked hard, paid their taxes, paid for their own house, educated their children, expected no handouts and saved hard.
Now, in his later years, he finds it hard to accept that his "neighbour", who may not have worked (ever), received free housing, medical card, free education etc and never saved a cent .... would be taken care of (rightly so) for free in their old age by the State (aka you and me).
While he would have to pay for the same care from his hard-earned life savings & potentially lose any money he had managed to save in his life. He believes his care should also be free.
It's a double-whammy and hard to argue against him!
If the system were fair, those of us who foot the bill now would avail of free care when our time comes...... rather than footing the bill now for our elderly citizens and footing the bill again when we ourselves are elderly.

Yep, that's the other side of it. And I'm pretty sure that both Mrs. Marsupial and I will be doing exactly the same thing when we decide that it's time to sell the yacht, dispose of the holiday home, stop the monthly standing orders to Trócaire and the VdeP and distribute our hard-earned loot to les enfants. So hopefully your siblings and you will still be hard at work and paying loads of tax that will help the Exchequer to keep the two of us in the luxury that we regard as our entitlement as upstanding citizens of this wonderful country!

 

[Annieindublin]

On the plus side my dad retired at 62 and he’s still doing well at 90. The civil service pension people didn’t expect that!