Home Economics: Answering your property questions
Published 07/10/2016 | 02:30
Q: The family home will pass to me when my mother passes away but she is quite insistent that it isn't sold as she wants me to live there - it has been in the family for a century. I would like to do this, but by my figures, the tax on it would be around €80,000 (the current house value is €525,000). There is no way I can raise this without selling the house, so it leaves me in a dilemma. Is there anything I can do to alleviate it?
A: Your calculation is correct. You can receive up to €280,000 without paying Capital Acquisitions Tax (CAT) as a 'Category A' recipient. Based on that, the balance (€245,000), taxed at 33pc, is €80,850.
Eoin McGee of Prosperous Financial Planning suggests solutions.
"When the time comes, you could raise a mortgage on the house, if that's possible, and pay the bill that way. Another option would be if you don't currently own any other property in your own name, and if your mother has a care need, you could move in with her and after three years, your mother can gift you the house under Dwelling Home relief, provided you live in the house for a further six years. Clearly this may not be suitable with a family.
"Alternatively, you could take out a Section 72 policy. This is life insurance that pays out in the event of your mother's death, with the proceeds paying the tax due, and not forming part of the estate. They can be expensive, however. Assuming your mother is 70, the cost to cover €80,850 would be around €350 per month."
It's worth balancing that off against the potential tax payable, i.e. she would have to live to 97 to have paid more in premiums than the tax.
Also, keep an eye on Tuesday's Budget - Inheritance tax thresholds are due to rise from parent to child, which will at least alleviate some of the tax due.
Q: In applying for a top-up mortgage, which we thought would be very straightforward, the bank has refused us due to an outstanding court judgement registered against me. I have no idea what this is about. The only time I was in court was early 2015 for a driving conviction which got me a fine, but I paid it after, admittedly, delaying to do so. We have more than enough money to make the mortgage repayments. Is there anything I can do?
A: When you apply for a mortgage, the bank will undertake a search of your credit history to ensure there are no loans in arrears or default. This may include fines or court judgements which they can hold against you.
It is entirely possible that this fine is what is troubling them, so it would be worth checking that out. Is it possible that even though you paid, it wasn't registered on court documents? Or perhaps you paid some, but not all, of the fine? I would ask your solicitor to find this out, or contact www.courts.ie and see if you can get more information.
It may also be the case that there is some other reason. Commonly, banks seek to get your credit score via the Irish Credit Bureau (www.icb.ie), which is a database of all credit issued over the last two years. If you skipped a payment, for instance, on a personal loan or even credit card, it will show up here and may alarm the lender. Apply for your score, which costs €6, to see and if an error has been made. The issuing bank can apply to have it altered.
The Ryan Review
By Sinaed Ryan
I've been giving out about Housing Minister Simon Coveney for the last few weeks, so maybe it's time to redress the balance.
The Housing brief is akin to Angola (which is the Health Ministry's unkind moniker), so often it's the little things that both trip you up and can be a force for good.
The latest "Repair and Lease" plan is both imaginative and box-ticking, with the added benefit of not costing a fortune.
With over 200,000 vacant houses dotted around the country (a surprising number in Dublin), it is landlords, who may be asset rich but cash poor, who are withholding doing them up or getting them out on the market. This can be due to credit tightening or the reluctance to take on a loan without guaranteed returns even in a buoyant market.
One million euros this year, and €2m next, will be made available to bring these often run-down properties back into use, by part-funding the works through a grant scheme in return for long-term leases for those on rental waiting lists. The real work, however, will be in the door-knocking - simply identifying who owns what and negotiating a deal is time consuming and bothersome, but necessary.
There will be interest in the results of a pilot scheme underway and it will add to talks with banks over getting hold of repossessed properties also.
More of the same please.