Home Economics: Questions and answers
Answering your property questions
Q My partner and I live in rented accommodation and have just had our first baby. Both our wages are needed. We understand the importance of life insurance and want to make sure our baby always has a home, but do we have to be married or have a mortgage before we can cover? How much would we need?
You are quite right to consider the financial implications if one of you were to die. While you don't have to be married or have a mortgage to take out life assurance, you need to structure a policy in such a way that the intention is clear for tax purposes and to provide a home for your child.
Joe Charles of Caledonian Life explains: "Co-habiting couples who are not civil partners are viewed as 'strangers' in the eyes of Revenue. As such, you may be subject to inheritance tax on life assurance claims above €15,075.
"Although this might not seem fair, it is the law. Therefore, a 'joint' policy taken out between you might result in a portion of the benefit becoming liable to tax, and you proving who paid what premiums etc, which you wouldn't want.
"A simple solution is for each partner to pay the other's policy, known as 'Life of another.' There would be no tax liability, as it would be deemed that the surviving partner paid for the benefits and therefore is entitled to the proceeds.
"In terms of how much you need, the industry rule of thumb is eight times your salary – if there are affordability issues, any amount of life cover in place is much better than none at all but costs have dropped considerably. Use a broker to shop around for you."
Q I have an EBS mortgage which I haven't paid in months and am terrified of contacting them. I have received lots of letters but I haven't told my wife. They are now phoning, looking for me to fill in forms and I'm afraid they'll ring her. I know I can't ignore it but am panicking over losing the house. I know they won't listen, or understand. I can't afford an accountant.
First of all, tell your wife. I'm no psychologist, but nothing is going to get better by ignoring it. Whatever conversation you have, it surely can't come as a total surprise. Do that today.
Secondly, I understand your fear about talking to the bank. I don't agree they won't understand but bank staff have a certain set of rules to follow and getting their money is top priority.
They probably want you to complete a Standard Financial Statement (SFS), which is a requirement before they can talk to you about what's going to happen next. You have to trust me when I tell you that taking your house off you is the very last thing they, or any bank, wants to do.
Let me offer an alternative: Under a new initiative set up with AIB (of which EBS and Haven are now part), the Irish Mortgage Holders' Association is acting as 'middle man' for free for customers just like you. They will meet you, help you fill out the SFS and talk to your bank for you. They will be sympathetic and realistic. You won't have to meet anyone from the bank.