The Fair Deal Scheme funding application process comprises two main elements, namely: 1. The Medical assessment of applicant; and
2. The Financial assessment of the applicant which is significantly more detailed and itself comprises two detailed sub-parts as described in more detail here below.
1. Medical Assessment of the Applicant
As part of any application to the Fair Deal Scheme, a medical assessment of the application seeking long-term residential care is undertaken by the nursing team attached to the Fair Deal Scheme. Typically they will visit the applicant to carry out their assessment and this is to establish a number of things:
- determine if the applicant is in need of a nursing home;
- establish if a nursing home would be the best environment for that person;
- assess what specific needs that the applicant might have in a nursing home; and
- as a consequence of the above, to advise what type of nursing home would be most suitable.
Note: the Fair Deal team will not direct the applicant/their family as to which nursing home they should go to, that is left to the applicant and their family to decide. However, there could be a requirement that the selected nursing home can provide proper care for someone suffering from Alzheimer's disease which may rule out certain homes. Availability of spaces may also be a factor.
2. Financial Assessment of the Applicant
Without doubt, this part of the Fair Deal Scheme application process is the most significant and requires quite a bit of work to satisfy the Fair Deal application team. It aims to permit the Fair Deal staff to establish the amount the applicant can afford to contribute towards the cost of their long-term nursing home care based on their recurring income and financial assets.
Like everything these days, there is jargon but we'll simplify it. There are two parts to the Financial Assessment element of the application process, namely:
(i) State Support (means tested)
This determines if between the applicant's income and assets, there is in sufficient means to pay for the cost of the nursing home. If there is a shortfall, essentially this is picked up by the Fair Deal Scheme (not on a loan basis but on a subsidy or contribution basis) and the applicant pays their share to the nursing home on an ongoing basis topped up by the Fair Deal Scheme's share.
If the applicant has sufficient means between income and assets to cover the full cost, then they pay the nursing home directly for such full amount. However, often part of the applicant's financial means are tied up in assets (e.g. a property such as the family home) and their regular income (e.g. State Pension) may be insufficient to cover the cost despite being able to afford it "on paper".
In the above case, the applicant may choose to sell an asset (if for example they have more than one property) and use the proceeds of the sale along with their regular income to pay the nursing home costs. In most cases where people only have a single main asset, typically the family home and as there may be a spouse/dependent child living there, they will not sell the family home but instead will borrow what they owe from the Fair Deal Scheme to be repaid when that asset is ultimately sold. This borrowing is possible under the optional loan facility under the Fair Deal Scheme and is called Ancillary State Support - see below.
(ii) Ancillary State Support (optional loan)
Ancillary State Support (also known as the optional loan) facility under the Fair Deal Scheme is essentially a loan facility which permits Fair Deal Scheme applicants to defer part of the payment that they have been deemed to be able to afford towards the cost of their nursing home care.
The idea is that the applicant pays a share of their regular income directly to the nursing home. The amount of this payment which is expressed as a percentage of the applicant's regular income is determined by the Fair Deal team and depends on whether the applicant is single or widowed (80% of their income) or is married (40% of the couple's total joint income.
Assuming the income portion is insufficient to cover the full cost and assuming that the applicant does not wish to sell their asset(s), they can apply to the Fair Deal Scheme for the Ancillary State Support (optional loan). If approved, the 'shortfall' amount arising from the relevant percentage of the asset value the applicant should pay each year towards the overall nursing home care cost is paid by the Fair Deal Scheme to the nursing home and recovered when the asset(s) is/are sold typically on the death of the applicant.
The loan is normally due within 12 months of the death of the applicant (delays beyond this incur penalty interest), however, if for example the applicant's spouse is still living in the house, Revenue will wait until either the spouse goes into a nursing home themselves or passes away. In such an instance, no penalty interest is charged by Revenue.
The Ancillary State Support loan is a very useful mechanism to fund the cashflow shortfall due to the nursing home while allowing the applicant to defer the sale of one or more assets which can be a very tax-efficient way of managing their estate. This loan does not carry an interest rate as such but when repaying Revenue, they will seek the amount due to them plus the cost of inflation which has not been significant in recent years.
If you need help with the Fair Deal Scheme, please email us at info@fairdealsolutions.ie or call us on 01-44 33 690 or 087 317 1502. We would be delighted to help you.
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