Monday 21 August 2017

Sinead Ryan's home economics

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During a financial review with my broker, he suggested I could save money on mortgage protection by switching to another company. I have a substantial loan taken out 15 years ago, so this is attractive, but my bank says the policy is 'assigned' to them and cannot be changed. What does this mean?

Modern mortgage protection products are being keenly priced as home owners live longer, healthier lives so I'm not surprised you received a better quote.

An assignment is a legal change of beneficiary on a policy so that in the event of your death, the proceeds would go straight to the bank rather than your next of kin, to pay off the mortgage.

All such policies are assigned. But it doesn't mean you can't get another, cheaper policy and assign it to them instead.

However, do bear in mind the following:

Make sure the new policy is in place before you cancel the old one. As this may involve medical examinations etc., it may take time.

Make sure the amount of cover and period of the policy is sufficient to cover your current loan.

Ask your bank for an assignment form. You simply complete this when the new policy is issued and send both to your bank.

We are making our will and wish to leave our home to our youngest child who is unmarried and lives with us – she cares for us as we are both in ill-health.

Our other assets are being divided up among the other children and they are happy with this.

However, we are concerned that leaving the house will create a tax bill for our daughter since she is getting a bigger "share" of our estate. Is there any way to avoid this?

The relevant tax is Capital Acquisitions Tax (CAT). Transfers from parents to children are classed as Group A and the first €250,000 is exempt.

This threshold amount may change in next week's Budget as it has been reduced over the years.

The threshold includes previous inheritances or gifts received since December 5, 1991.

CAT is charged at 30pc above this threshold. You will need advice on whether your house is worth more than €250,000 but if so, then she may incur a tax liability.

However, says Susan Cosgrove, of Cosgrove Gaynard Solicitors, there is a special relief known as "Dwellinghouse relief" which she may avail of for full exemption under the following criteria:

She has lived in the house for at least three years prior to the inheritance.

It's at the same time as the disponer. A recipient is normally disqualified unless the disponer is reliant on services provided by the beneficary of the inheritance.

In this case, being a carer would qualify your daughter for the exemption. She must not be entitled to inherit any other dwelling and must continue to reside in the house for six years after the inheritance to avoid a tax clawback.

It looks to me like she will fully qualify, but please check with your solicitor when drafting the will.

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