The Fair Deal Scheme three-year cap on family farms Top Tips

The Fair Deal Scheme three-year cap on family farms Top Tips

The long-awaited Fair Deal Scheme three-year cap on family farms and businesses finally came into effect on October 20.

The cap is broadly similar to the dwelling house cap but is far more restrictive and subject to several conditions:

■ The applicant must apply to the HSE for the appointment of their family successor. The HSE will review each appointed family successor to make sure that they comply with the conditions of the Scheme.

The application can be reviewed at any time during the six-year period post-application, and the appointed family successor will need to provide official documents as proof that they are continuing to run the farm or business.

The successor must be 18 years or older; and a relative of the person who needs care; or the partner of the person who needs care; or a son-in-law or daughter-in-law of the person who needs care or their partner.

■ The family successor must commit to run the farm for at least six years, beginning from the day they are appointed, by way of a signed statutory declaration that a substantial part of their normal working time will regularly and consistently be applied to running the family asset.

While it is not entirely clear, it is presumed that persons with off-farm employment are not ruled out.

■ A substantial part of the working time of the applicant, their partner or their family successor must have been devoted to running the family farm for at least three of the last five years prior to the applicant entering care.

■ Where the asset is a transferred asset, each owner of the transferred asset must consent to the making of the application for the appointment of the family successor.

If a family successor does not comply with the conditions of the scheme, this may lead to money being refunded to the HSE.

For example, if the successor decided to lease the farm, this would constitute a breach of the conditions and would result in a repayment of benefit already received.

Where the family successor can no longer comply with the conditions, they must contact their local nursing home’s support scheme office as soon as possible.

An application for the appointment of a new family successor will be required, to continue to avail of the three-year cap on the farm or business assets.

People currently in the scheme

A person already availing of the Fair Deal Scheme may now avail of the three-year cap under the new criteria by applying for the appointment of a family successor.

Payment of financial support cannot be back-dated, so no refunds can arise regarding any payments made before the three-year cap has been applied.

For example, if a person has spent five years in care, they may qualify for the three-year cap relief from the date a family successor is appointed and meet the other conditions, but they cannot be repaid any prior payments already made towards the cost of their care.

Legal charge on land

The applicant must agree to HSE placing a ‘charge’ in favour of the HSE on the farm.

This must be agreed by the applicant, his/her partner and any other owners of the farm or business.

A charge is a type of mortgage that will be placed on the property until the successor’s commitment period of six years has ended. The charge will be removed once all other conditions of the three-year cap have been met.

People with reduced capacity

If a person in/entering care is incapable of making an application, certain people may apply on their behalf. These include:

■ A person appointed as a care representative (a person appointed by Circuit Court)

■ A committee for Ward of Court (a person appointed by the Office of Ward of Courts)

■ A holder of a registered enduring power of attorney (chosen to act on behalf of another person); this needs to be in place before the applicant becomes unable to make decisions.

The number of people that can sign on the applicant’s behalf is very limited, which underlines the importance of establishing power of attorney — if not in all cases, at least in cases where there is a concern that the person’s capacity may be diminished in the future.

Case Study – benefit of the three-year cap

Joe Farmer is 72 and owns an 80-acre farm valued at €800,000. His dwelling is valued at €140,000. Joe has savings to a value of €50,000 and both he and his wife have State pensions worth €26,818 annually.

Joe is in failing health and has been suffering from dementia for some time and now needs nursing home care.

Joe’s son John is farming the land and fulfils the criteria to qualify as a family successor.

The benefit of the three-year cap

Summary

For the three years prior to the cap taking effect Joe and/or his family will have to pay out €45,672 per year towards the cost of his care.

If John was meeting this cost out of his income, he could avail of up to 40pc tax relief, reducing the net cost to €27,403.

However, after the three-year cap comes into play, the cost of care is reduced to €10,747 or €6,448 after maximum tax relief.

Please contact us if we can be of assistance to you in all matters concerning wills and estate planning.

Tips on how best to avoid a “Wills Challenge”

Tips on how best to avoid a “Wills Challenge”

Families can be torn apart by wills. Ill-thought out, poorly communicated, and indeed absent wills can trigger major family rifts – particularly where property or land is involved, as is often the case with Irish families.

Even seemingly fair wills can lead to deep divisions.

However, there are some steps you can take to help avoid the huge upset which your will might cause.

Damage limitation

Consider discussing your will with your family before you finalise it.

A will is a private thing – and whatever you put into it is your business. Where there’s a number of people in a family, it can be a good idea to sit down with them all – or sit down with them individually – and ask them what they want from your will. You may find that a person doesn’t want what you had planned to leave to them. The problem though is that whenever a family start to discuss what they want from a will, it can cause rifts before the person even dies.

Avoid suggesting to people that you’re going to leave something to them – if you have no intention of doing so or if you haven’t already included such instructions in your will. You may die before making a will and should that happen, the person is unlikely to get what you promised them. Unfulfilled promises can be a major source of strife with inheritances. Many people have been promised inheritances of land sites, houses or cash – only to find that those assets have not been earmarked for them in a will. This can lead to disappointment and resentment.

Attaching conditions to an inheritance can be another major source of family rows.  People often leave the family home to someone on the condition that the property can be used by the rest of the family as a holiday home. Not a good idea.

Another major source of family rows is when one child is treated differently to others in a will. “Parents may decide that one child gets less than others,” said Patrick Murphy, managing director of Retirement & Life Planning, which runs retirement courses across the country. “Perhaps the child was put through college – when the others weren’t and so the child who received the college education may not be getting left as much. If you’re going to do something differently for one of your children, be sure to explain why.”

An explanation should also be given if one child, relative or individual is being left much more than others in the family.

Biggest mistakes

One of the biggest mistakes you can make when it comes to wills is not making one. You are said to be intestate if you die without making a will, and in such cases it is ultimately the law that decides who inherits your wealth and property. Should you die intestate, when you are survived by your spouse and children, the rule of the law is that two-thirds of your estate will go to your spouse; with the rest divided equally among your children. This may not be how you wish your estate to be divided.

Following family or local traditions may also be unwise. In rural areas, people often still have the tradition of giving everything to the eldest son so that the family name is carried on after the parents pass away – particularly if it’s a farm or land that’s being passed on. The family name can still be lost if you do that though – as the eldest son could sell on the land or farm.

Even if you make a will, failure to regularly review it can lead to problems – or see important people in your life lose out on an inheritance.

“People often make a will when they take out a mortgage but they never review it afterwards,” said Derek Bell, chief operating officer with the Retirement Planning Council of Ireland. “However, people will come in and out of your life after you make a will – and your circumstances are likely to change as you get older. So it’s important to review a will every five years.”

Children can often be overlooked in wills – particularly in the event of the untimely death of one or both spouses. Should you have children, it’s important to include them in your will – regardless of which spouse outlives the other. This is particularly the case if your children are young, or if one of them has a medical condition or disability and so requires care and financial support. Couples often plan to draw up a will where the surviving spouse inherits everything – on the assumption that one spouse will outlive the other and that the surviving spouse will look after the children. However, this may not always happen. Both parents could have an untimely death or die at, or very near, the same time. “There will effectively be no will if both parents die at the same time and a will has been made leaving everything to the surviving partner,” said Bell. Be mindful too that one spouse could remarry after the other passes away – or that one or both spouses could remarry if the marriage breaks down. In such cases, the children of the first marriage could be at a disadvantage if they haven’t been provided for in a will.

Will must-knows

You cannot disinherit your spouse or civil partner. Should you make a will but leave your spouse out of it, he or she is entitled to a legal right share of your estate – which can be claimed after you die, if they wish to do so. In such cases, should you have no children, your spouse has an automatic right to claim half of your estate. Should you have children, your spouse is entitled to a third of the estate and your children are not necessarily entitled to the rest. You do not have to leave anything to your children in your will. However, if you do not, they may be able to challenge your will on the basis that you have not fulfilled your obligations towards them.

You can leave instructions in your will stating that money in your bank account be used to cover the cost of your funeral expenses when you die.

Hire a solicitor or get professional advice when drawing up your will – otherwise, you could make a will which is wholly, or partly, invalid. Should this arise, the rules of intestacy will apply to either the entire will or the invalid part – and so your wishes on how your estate is divided are unlikely to be carried out. Tell a trusted relative or friend where your will is.

Wills are said to bring out the worst in human nature so there is never any guarantee that yours will be received amicably, despite any efforts you take to achieve that. Still, it’s worth doing what you can to avoid conflict after you pass away.

” In contentious business, a solicitor may not calculate fees or other charges as a percentage or proportion of any award or settlement.”