Ireland’s New Age Problem!

Elder Care

Ireland’s Ageing Population

• The Statistics

• Increasing Demand for Care

• Nursing Home Development Needed

•Regulation/costs and falling fees mean the business less attractive

1

Applying for Care

• Home v’s Nursing Home

• State Support

• Care Needs Assessment

• Financial Assessment

• Anscillary State Support

2

Nursing Home Fees – An early Inheritance Tax!

• Advice focused where assets exceed inheritance tax threshold

• But Nursing Home fees attack family inheritance prior to death!

• Particularly the “Mass Affluent”

• Elder Care Finance - Relevant to everyone!

3

Agenda

The StatisticsIreland’s

Ageing Population

Ireland’s Ageing Population2011-2016

• Increase in age 65 and over– 2011 total of 535,320– 2016 total of 637,567 (an increase of over 102,174)

• The 25-64 age group increased by roughly 47,400!!!

– 2046 total estimate of 1,400,000

• Increase in age 80 and over– 2011 total of 128,000– 2036 total of 345,000– 2046 total of between 470,000 and 484,000

• A 378% increase!!

* Figures published by CSO in 2013

Population Projections 2011 - 2046

Increasing Demand for Care

Ireland’s Ageing

Population

• Majority are living in Private Households

– 587,284 People over age 65

• 156,799 (approx. 27%) living alone

• Numbers living in Nursing Homes

– 22,762 people over age 65 (an increase of 9.4% since 2011)

Staying at home v’s Communal Living

* Census 2016

Growth in Demand for Health Services

• Home care

– Demand for home help hours is projected to increase by between 38% to 54% per cent by 2030 (from 14.3 million in 2015).

• Long-term and intermediate care

– Demand for long-term and intermediate care places in nursing homes and other settings is projected to increase by between 40% to 54%.

ESRI – Oct 2017

Nursing Home Development Needed

Ireland’s Ageing

Population

Bed Numbers

Nursing Home beds

currently available

Private, Public & Voluntary 23,000

433 Nursing Homes

94% Occupancy

HIQA -Increasing Regulation & Higher Standards

Approx 40 (typically smaller homes) closed in

last 5yrs

Estimated need for

6000 more beds by

2025

• HIQA standards – Development cost of €120k - €160k per Nursing

Home bed!• 60 bed home costs between €7.2m and €10m to build

• Staff costs increasing• Older entry age = Higher Dependency• NTPF aggressively negotiating with Private

Nursing Homes– Fair Deal rates falling

• Generally between €800 and €1,200 per week – Average Nationwide €884

– Public homes not subject to same rules!

*No Correlation between HIQA and NTPF

Triple Whammy of Rates, Regulation & Costs!

Perhaps most notably, the low level of the Fair Deal rates, specifically outside Dublin, and the fact that the operators are highly reliant on

the income they provide, have a combined effect in discouraging investors entering the sector. The rates are set to only cover the cost of care, with costs associated with capital investments not included.

Marian Finnegan – Cushman & Wakefield

The Application Process Home & Nursing Home

Applying for Care

• HSE provides

A. Home Help Service

• Personal Care & Essential Domestic Care

B. Home Care Package

• Recovery from Acute Hospital

• To prevent admission to Acute Hospital or Nursing Home

Home Care

• Tailored to your individual needs– Care Needs Assessment identifies your overall health needs and your level of

dependency• Nursing, Physiotherapy and Occupational Therapy etc.

– Assessment by Home Care worker e.g. Public Health Nurse– Service provided by 32 providers nationwide – Approved by the HSE

• Not means tested– Generally min of 5 hours per week– Typical package value between €300 and €500 per week

• Excess Services paid for by individual– Up to €28 per hour– Tax relief available

Home Care Package

Application Process

Nursing Home support Scheme

(Fair Deal)

Care Needs Assessment

Financial Assessment for State Support

Nursing Home Loan

(Optional)

Choose Nursing Home

PersonalChoose Nursing

Home

Application Process – Fair Deal

• Mandatory Care Needs and Financial Assessment

A. Care Needs Assessment – Similar to Home Care Package

• Carried out by Health Official – Common Summary Assessment Report (CSAR)

– Submitted to Local Placement Forum (LPF)

» Multidisciplinary team supported by consultant Geriatrician

– LPF make determination re care required and duration of that care

B. Financial Assessment

• Income and Assets assessed to establish level of contribution

Application Process – Fair Deal

• Optional Ancillary Support – Nursing Home loan

– Interest free loan available on all assets

• Once repayment made within specified time limit

– Adjustment to account for inflation (CPI)

• Choose Nursing Home

– Review list of local homes at www.hse.ie

• http://www.hse.ie/eng/services/list/4/olderpeople/nhss/costs.html

Application Process – Personal

• No Care Needs or Financial Assessment required

– Just apply directly to Nursing Home

• Choose Nursing Home

– Review list of local homes at www.hse.ie as per Fair Deal applicant

• http://www.hse.ie/eng/services/list/4/olderpeople/nhss/costs.html

• Public or Private Nursing Home?

– A big consideration for individuals paying personally

• Often a wide cost differential between both!

An Early Inheritance Tax!

Nursing Home

Fees

One of life’s most expensive outlays

•Between €50,000 and €90,000 per person per annum!

1Senior citizens faced with extremely complex financial decisions

• Consequences of getting things wrong can be catastrophic!

2Elder Care Finance

• An area of advice that is overlooked

• Needs to be considered as part of inheritance planning

• Ideally 5yrs prior to needing care

3

Cost of Nursing Home Care

• For those with high levels of income or assets

– Basic formula to determine what makes sense

• Private Nursing Homes can charge higher rates to Private (paying personally) Residents

– €1,200 to €1,800 per week

• Generally a Dublin issue

• Tax Relief?

– Payments to Nursing Home Care are fully tax deductible

• Resident and/or family member!

Paying Personally

The more you have....The more you have to pay!

State Support Scheme – Fair Deal??

• Fair Deal introduced in 2009 (2018 budget €961.7m)

– To assist those who can’t afford to pay full cost of care personally

• Individual makes a contribution towards fees

• Financial Assessment to establish level of contribution

– Income

• 80% of all after tax income less certain deductions

– Assets

• 7.5% of assets (first €36k/€72k not counted)

– Rate was 5% prior to 25th July ‘13!!!

* 5yr Lookback rule on Asset Disposal

State Support Scheme – Fair Deal

• The Family Home is considered an asset like any other

• Except that the 7.5% deduction stops after 3yrs in Nursing Home Care

• What if I sell the home?

• 7.5% deduction continues until death so Don’t!

• What if I rent it?

• Rental Income is added to other Income• So subject to 80% rule for calculating contribution

• Where Family Home represents a large portion of assets

• Consider holding off on Fair Deal application till after 3yrs? • Pay personally for the first 3yrs

• Resident and/or Family Member

The Family Home under Fair Deal

• Deductions in relation to income:– Income tax, PAYE, Universal Social Charge and PRSI– Health expenses (GP visits, prescription charges, medicines and medical expenses

after tax refund).– Maintenance payments to other people.– Interest on loans on your home.– Levies required by law to pay such as property tax.– A dependent child in full-time education.

• In the case of assets, the net value of the asset is assessed i.e. its value minus any borrowings incurred specifically for the purchase or improvement of the asset.

• There are safeguards built in to the Financial Assessment which ensure that:– Nobody will pay more than the actual cost of care– You will keep a personal allowance of 20% of your income or 20% of the

maximum rate of the State Pension (Non-Contributory), whichever is the greater– If you have a spouse or partner remaining at home, they will be left with 50% of

the couple’s income or the maximum rate of the State Pension (Non-Contributory), whichever is the greater

Contribution Calculation

Anyone who is paying the costs of another person’s healthcare can claim it as an expense against tax...

• as long as the care or procedure meets the criteria laid down and is not already being reimbursed by another person or body

• Regardless of whether or not the person on whose behalf the cost was defrayed has an income in his or her own right, tax relief on the full cost of maintaining an individual in a nursing home may be allowed in cases where the claimant – a) has actually defrayed such cost; and – b) has not been reimbursed, directly or indirectly, by the nursing home

resident or by a third party in respect of such cost. • (If so, reimbursed tax relief may be claimed on the amount paid to the nursing home

less the amount reimbursed.)

https://www.irishtimes.com/business/personal-finance/claiming-relief-on-mother-s-nursing-home-expenses-1.2973971

Section 469 Taxes Consolidation Act 1997

Section 469(2)(b) of the Taxes Consolidation Act 1997 provides that individuals who avail of financial support in the form of the “ nursing home loan” may claim tax relief in respect of any other contributions paid for nursing home care based on their own weekly/monthly income and savings, in other words, amounts paid by the individual in addition to the contribution made by the State under the Nursing Home Support Scheme.The amount which is paid by the HSE does not qualify for tax relief in accordance with section 469(2)(c).

Section 469 Taxes Consolidation Act 1997

Section 469 (3)(b) provides that any amounts paid out of the estate of a deceased person in respect of health expenses as defined in section 469 may be allowed against the tax liability of the deceased individual. Therefore, any deferred payment under the “nursing home loan” defrayed out of the estate of a deceased person by his or her executor or administrator is deemed to have been defrayed by the deceased person immediately before his or her death and may be claimed under the heading of health expenses against the tax liability of the deceased person by the executor of his or her estate.

Section 469 Taxes Consolidation Act 1997

Nursing Home Fees of €75,000Fair Deal Contribution Calculation

After Tax Income By 80%

Assets7.5% over €36k

Home7.5% for 3yrs

Contribution to FDyears 1-3

Contribution to FDyear 4 onwards

Total 5yr Contribution of the €375k total

Mrs. Jones €15,000 €0 €0 €12,000 €12,000 €60,000

Mrs. Murphy

€30,000 €150,000 €250,000 €54,000 €35,250 €232,500

Mrs. Kelly €40,000(Gross roughly €50k)

€250,000 €500,000 €88,250(No more thanCost of Care so €75,000)

€50,750 €326,500

Mrs. Smith €50,000(Gross roughly €70k)

€464,000 €1,000,000 €149,800(No more thanCost of Care so €75,000)

€74,800 €374,600

Renting the Family HomeRevised Fair Deal Contribution Calculation

After Tax Income80%

Assets7.5% over €36k

Home7.5% for 3yrs

5% Rental Incomemultiplied by 80%

Contribution to FDyears 1-3

Contribution to FDyear 4 onwards

Total 5yr Contribution of the €375k total

Mrs. Jones

€15,000 €0 €0 N/A €12,000 €12,000 €60,000

(No Increase)

Mrs. Murphy

€30,000 €150,000 €250,000 €12,500 €64,000 €45,250 €282,500

(+€50k)

Mrs. Kelly €40,000(Gross roughly €50k)

€250,000 €500,000 €25,000 €108,250(No more thanCost of Care so €75,000)

€70,750 €366,500

(+40k)

Mrs. Smith

€50,000(Gross roughly €70k)

€464,000 €1,000,000 €50,000 €189,800(No more thanCost of Care so €75,000)

€75,000 €375,000

• Min of five years prior to entering Nursing Home

– Consider divesting all (or at least some) assets to family members

• Annual Small Gift Exemption of €3000 – No limit to the number of relatives or in fact people

• CAT exemption on Gifts of €310,000 per child– €32,500 limit to Grandchildren

• When in Nursing Home

– Too late to reduce the Fair Deal contribution

• But family members should consider paying– Particularly those in 40% higher tax bracket

Elder Care Financial Planning

Ireland’s ageing population

• Up to ½ a million over 80’s by 2050

• 29,000 Nursing Home Beds by 2025

• But HIQA and NTPF conspiring to make it an unattractive investment!!

1

Nursing Home Fees – An early inheritance tax

• Hitting the Mass Affluent

2

Education Needed

• Min 5yrs before needing care

• Complex decisions

• Fair Deal or Not?

• What to do with the Family Home?

• Who Pays etc.?

3

It may not make sense to save for Nursing Home Fees!

4

Summary

Risk Warning/Disclaimer

This presentation represents a personal view and does not in any way constitute advice

All examples and figures are for illustrative purposes only and we recommend you seek taxation and/or legal advice

tailored to your specific circumstances