Should I gift money to our children now?
We are retired and fortunate to be on defined benefit pensions, but we also have about €500,000 in savings. We have two grown-up children in their late 20s and early 30s, one with a young family while the other has plans to start one at some point.
We've always had this low-level anxiety about nursing home fees for when the time inevitably comes. Recently I spoke to someone about an acquaintance with dementia who passed away after 10 years in a nursing home. The family was clearly struggling with burden of the €60,000-a-year private nursing home fees. Should we be thinking about gifting our children their inheritance now rather than later in order that our children might have more options - or simply more control - over the financial issues vis-a-vis Fair Deal that would inevitably would come with it? I hope you can help.
Frank, Co Offaly
You are in a good position; you both have long-term clarity on where your income is coming from thanks to your defined benefit pensions. However, if one or both of you ends up needing full-time nursing home care, you probably won't be eligible for the Nursing Home Support Scheme (the Fair Deal scheme), which is means-tested, and your half-a-million euro in savings could be gobbled up. In those circumstances, you'd be left with not much to pass on to your children.
As you suggest, gifting money to your kids now makes sense. For one thing, it seems like your children could do with financial assistance to set up their homes now - but there's another good reason.
While there is no certainty that either of you will end up in full-time care, there is certainty around taxes.
As it stands, your savings and the value of your property and pensions split between your two children on your death is likely to amount to more than the allowance of €310,000 for a child, which means they'd be liable for 33pc tax on anything over and above that.
So, start gifting them your estate now. Provided that the kids haven't received any substantial gifts from you, they can receive up to €310,000 in total without any tax liability to you or them.
If you plan it well, by the time you pass away, your estate will have diminished to the extent that they won't need to pay Capital Acquisitions Tax (CAT) on their inheritance because it will be under €310,000 each.
In this scenario, even if you do need full-time care, you can apply to the Fair Deal scheme and, because your assets are fewer, will probably be eligible for it. Your kids still get your estate tax-free.
The Nursing Home Support Scheme has a five-year look back, which means it will count any assets you had in the five years before you apply for the scheme.
This should give added impetus to you to start passing your wealth on to your children as soon as possible.
Keep shares or sell?
In 2007 I inherited shares when my mother passed away. I keep getting dividend cheques but having to lodge them is a nuisance - and I have no idea what shares I have at this stage. I used to have Anglo shares that are now all worthless and I'm not sure if I should keep the shares long-term. Plus, I am thinking of changing the car or doing a bit of renovation work to the house. What do you recommend?
Eithne, Co Dublin
The first thing I'll say is that it's a nice problem to have. For many people who own shares in one company (known as single-security assets) rather than in diversified investment funds, lodging dividend cheques is a rare inconvenience. You know that only too well, indeed that's what surprises me about this question - having lost money on Anglo shares, you are potentially making the same mistakes again.
There's another inconvenience you haven't mentioned and that's declaring the gain to Revenue in a CG1 return, assuming it's over €1,270.
I'm not against someone having shares where exposure to failures in the management or governance practices of that one company is mitigated by shares in multiple other companies in different countries and different sectors, in other words, as part of a globally diversified investment strategy. Somehow, I don't think this is the case here.
Neither do I get the impression you are relying on the income to achieve life goals, and I'm glad to hear that.
It would be a white-knuckle ride to watch the volatility of company shares in the markets today knowing that your future depended on them rising in value until whatever date in the future you need to sell them.
As far as I can see, here you have one option: sell the shares. If they are producing dividends, they should command a reasonable price.
You didn't buy them, so you aren't concerned about making a specific return. Use the money to buy a new car or renovate the house.
Use the losses to offset any future capital gains on an investment that is subject to CGT on exit. Note: do not buy any more individual company shares. Declare the losses via the CG1 form to Revenue - there is no time limit.
Overpay on a tracker?
We are on a tracker mortgage and are in a position to overpay, as the experts seem to be constantly recommending - in order to shorten the mortgage term and the final amount we pay in interest. It's very appealing, but a friend of ours recently asked why we should bother given that trackers represent such cheap money at the moment and that we should use our overpayment amount towards something else instead? This has us wondering now. Does he have a point?
Donald, Co Wicklow
It is true that a so-called tracker mortgage, which reflects the European Central Bank interest rate plus a small margin, is a cheap form of credit. Your friend has a point in that regard. But the danger of taking advice from friends and even experts, when it is not given in a tailored way, is that the general view might be wrong for you.
I would ask you what your goals are (I'll bet your friend didn't ask you that).
Do you want to have your mortgage paid off before retirement, for example? If retirement is coming soon, then that's a good argument to overpay.
But how are you set up for retirement? Are your pensions going to sustain you? Have you boxed off things like life assurance? Do you have children who might want to go to college? If that is the case, an investment to fund college might be a better use of the money now.
This is an opportunity to map out a detailed plan for the long term, but you are not going to be able to do that by listening to anybody and everybody. It's time to change the way you get financial advice.
The only way to cut through the noise is to get tailored advice from someone who'll take an umbrella view of your whole life, not just the mortgage.
Sunday Indo Business