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
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.