Home Economics: Answering your property questions
Q: My parents divorced when I was in my thirties and when my father died he left me €200,000 in his will. With this money I bought a house some eight years ago. As it was under the tax threshold at the time, I didn't need to pay inheritance tax. My mother now has cancer and is not expected to live beyond a year. Her will has bequeathed me her estate, which is her house, probably worth around €230,000 or thereabouts.
My question is whether I can inherit this tax-free also, as it is under the €280,000 threshold, due to the fact that they are divorced? Are the two bequests seen as separate?
Sinead replies: I can see where you're going on this, but I'm afraid it doesn't work like that.
Susan Cosgrove of Cosgrove Gaynard Solicitors says that for the purposes of Capital Acquisitions Tax (CAT), all gifts and inheritances taken on or after December 1991 that come within the same group threshold are added together to determine the amount of tax payable on any current inheritance.
"Therefore unfortunately in your circumstances, both inheritances will be aggregated as they are both inheritances from a parent [it is your relationship with the donor that matters and so the fact that they are divorced does not affect this] and both under the same 'Group A' threshold", she says.
"As the first benefit of was below the 'Group A' threshold, no tax applied. However, this second inheritance brings you over the threshold and tax applies on the excess".
You should calculate it based on the amount over €280,000 (or whatever the limit is at the time of the estate passing to you - and bear in mind it may well be increased in October's budget), at a rate of 33pc. The tax is payable within six months of disposal of the estate.
Q. I'm renting for the first time and have moved into a fourth-floor apartment. My father is insisting I get insurance, but I don't think I need it. Obviously the building and so on is covered by the landlord, and I can't see anybody breaking in to take my stuff, of which there isn't really much.
I'm on a tight budget and don't want to waste money. What do you think?
Sinead replies: Do you have a smart phone? Or a laptop? What about a bike or some nice jewellery or shoes? I'm afraid I'm with your father on this one. Insurance is very important.
I can see how you believe height will protect you from burglary, but most valuable items are lost outside the home, not in it.
Many policies cover you, say, being mugged on the street, or losing your phone, so that makes it worthwhile, but just one in three renters have insurance, according to a recent survey. You could ask your landlord if there's a group policy for tenants, which may not be costly.
I'm sure you think you don't have much to steal, but if it was all gone in the morning, you'd be hard-pressed to afford to buy it all again. If you are finding cover expensive, consider at least gadget insurance. It's a specialist form which covers, usually, five gadgets, and starts from around €6 per month.
The Ryan Review
There has been much discussion on the topic of freeing up family homes, particularly in Dublin, currently occupied by empty nesters. The narrative is that they're rattling away in large, dusty rooms, struggling to heat the palatial space, while a family of four is squeezed into a shoe-box up the road, and a quick swap would be a win-win for all.
It's an economist's view, rather than a sociologist's, or a psychologist's, or even a political one. In the UK three and four beds dominate stock outside London, but in fact the demand is for one- and two-bedroom properties - preferably bungalows, which the older person favours. In the US, a study by Boston College found many pensioners had delayed retirement during the recession and 'downsizers' now exceed 'upsizers' by three to one.
The reluctance to turnover property, even by the elderly who see the logic in it, is manifest. Although the rest of us struggle with the notion of 'turfing pensioners out' of their leafy suburbs into high-rise apartments, the seniors themselves have more prosaic concerns. They have 'stuff', for example; a lifetime of it. And most want to remain living in the same community, if they're going to move.
We can, and should encourage and facilitate, through Government policy, the process.
A tax break, assistance programmes and suitably-built houses, which don't have to be cheap, would be a start.