You may have seen from recent news and media that the government is considering allowing rental income to be excluded from the calculations for nursing home residents availing of the Fair Deal Scheme funding. In simple terms, the proposal being discussed is suggesting that when the Fair Deal Scheme team calculates how much a Fair Deal Scheme applicant would pay towards the cost of their long-term residential care in a nursing home which is based on the person's income and assets, that rental income arising from the renting out of the person's home, would be excluded from these calculations.
The motivation to introduce this is to free up more rental accommodation that would (and does) otherwise lead to unoccupied homes. Apart from any housing issue, it is often said that homes do not like to be unoccupied for any long periods of time. Also, there can be insurance issues as many insurance companies are unwilling to insure properties that remain unoccupied for more than even a couple of months each year.
On the face of it, this could be very attractive to the applicant as it would mean that they would end up with more income (assuming the rental income exceeded any tax liability and cost of maintaining the property etc.) than they would if the rental income was included in the Fair Deal Scheme affordability calculations.
Such additional income could pay some or all of the extra costs that nursing homes often charge whether these are specific costs to the individual resident (e.g. hair-do's, physiotherapy, chiropodist costs, etc.) or extra costs that are levied on all residents irrespective of whether they are availing of 'extra' activities e.g. flower arranging, musical entertainment, bridge classes, dancing, etc. These extra costs are not covered by the Fair Deal Scheme but can be quite significant and often a real challenge for the resident and their family to meet.
So far, so good. But, there are those who are concerned about the potential unintended consequences. For example, could the introduction of such a rule encourage undue influence on an elderly person who may be a sole occupant of their home to go into a nursing home earlier than they should or need to? Could there be interested parties seeking to benefit from some or all of the rental income, again to the detriment of the older person? Civil liberty groups have raised some good questions in this area which is far from clear cut.
A little-known fact...If an applicant rents out their home and then pays that rent to the nursing home as part of the cost of their care, they can avail of income tax relief at their marginal tax rate which has a not too dissimilar effect to the 'tax-free' rental income proposal in this scenario.
One might ask why a resident would do such a thing. The answer is not obvious as there would not be any direct or immediate benefit to the resident but, depending on the individual scenario (noting that each person's situation, financial and otherwise, is different), but it could well mean that on the death of the resident there is less owed to the Fair Deal Scheme (well Revenue in fact) if availing of the Ancillary State Support (i.e. optional loan) and therefore, there is more left in the resident's estate and therefore potentially more inheritance for the beneficiaries of their estate. That's long-term planning there and something that we in Fair Deal Solutions help people with.
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