Your personal finance questions – Can tax be avoided if I split the inheritance of my house in a will?
Q I own my own house. However, my immediate siblings are all deceased. I want to avoid, or limit, inheritance tax for whoever I leave it to. I was wondering could I assume the value of my home and divide it among a number of people below the amount they would be liable to pay tax?
A To reduce the inheritance tax, it would be a good idea to spread out your estate so that more beneficiaries can avail of the tax-free threshold, according to solicitor Susan Murphy of MakeMyWill.ie. At present, your nieces and nephews can inherit up to €32,500 each, and anything above this is taxed at 33pc, she says. More distant relations such as cousins, or friends, can inherit up to €16,250 each before any inheritance tax. Charities are exempt. It is worth noting that if you state in your will that your house should be sold, and the proceeds split between the various beneficiaries, if any of them will have a tax liability, they won’t have to pay it until after the house is sold, when the cash would be available to pay it. Ms Murphy added that if you are going to bequeath exact amounts to your beneficiaries, bear in mind there could be a residue left over, or even a shortfall. You may wish to leave percentages instead.
Q We don’t have private health insurance but we have had a cash plan with HSF Health Plan for many years. I see that all health insurance plans are increasing again and I am worried that my cash plan may now become unaffordable as I am currently out of work.
A The first point to note is that most of the recent increases refer to private health insurance plans only such as those from Vhi, Laya and Irish Life Health. Cash plans are a separate range of products available from HSF Health Plan, according to Dermot Goode of Totalhealthcover.ie. He said the good news is that this company has not increased its rates since 2017, and at the time of print he was not aware of any imminent price increases on the cash plans. Mr Goode said this should mean that you can maintain your cash-plan cover at the same cost for the time-being. If a price increase is announced at some stage in the future, he advises that you should contact HSF directly to discuss other alternative cash plans that may better fit your budget. In other words, you should consider all options first before cancelling your cover.
Q I stress about money. I have debts since I got separated. I have a full-time job but just don’t know where my money goes every month. I have some debt. How can I get to grips with money and start saving?
A Since you are in full-time employment and on a set salary, your income situation is stable, according to Frank Conway, founder of financial wellbeing provider MoneyWhizz and a qualified financial adviser. Your problems appear to surface on the expenses side and it is here that you must place your primary focus, he says. You have indicated there is some debt but do not say how much the debt is for and if some of it was taken out jointly with your ex. However, if your name is listed on the debt, you have to ensure it is managed.
When it comes to spending in general, which includes spending for essentials and any discretionary spending, it is crucial that you have visibility of it. The most effective way of doing this is by using a budgeting sheet. Mr Conway says you can download a free one from MoneyWhizz. Here, you will need to complete your information on your income and then, all of your expenses.
If you can track all of your spending for at least three months, this will provide you with a very detailed account of where your money goes. A good trick here is to use your current account statement as the primary source of information and if you use them, three months of credit card statements. Also, for increased spending visibility, collect as many receipts as you can to double-down on tracking all your spending, he advises.
This process might seem laborious but it is a proven method to get on a sound financial footing. When you have all of the spending details, you will need to question it. What you want to identify is whether or not you have the means to save some money every month. If you do, build a rainy-day fund. If you still have a lot of debt to pay off look to find ways to accelerate those repayments.