DEADLINE IS NEXT MONDAY 15TH SEPTEMBER
Please read this link for more information.http://www.revenue.ie/publications/tax-briefing/issue-69/voluntary-disclosure-initiative-deposit-interest-reporting.htm
Its an area most of us tend to push until ‘tomorrow’ or on the long finger but one which MUST be dealt with for our own sakes.
Heres some help from www.myinheritace.ie .
Frequently Asked Questions about inheritance and Succession are posted below.
Many inappropriate decisions are made only when people are on their death-bed which is not the right time to be consulting a Solicitor e.g. in terms of property succession.
It is desirable to make Wills when in good health and capable of deciding how best to perform that task in the interest of the families and other intended beneficiaries.
Start thinking now about your outline plan: “Once you have accumulated property, you should put a Will in place” (p.99).
The earlier you start thinking about your plan the more likely you are going to be able to put in place a tax efficient roadmap to get your assets to the next generation.
Usually parents will have a rough idea in their heads; that for example they want the farm to go to John because he is the eldest son and he has always worked the farm or that they want the apartment in Waterford to go to Mary because she lives down there and can look after it fairly handily or whatever the circumstances might be.
This is really the hard bit : it can be the source of considerable tension in families in trying to accommodate all of the children and it is important to remember that taxation is not the overriding consideration: this should only be a secondary consideration to what is being planned and in balancing the competing rights of all of the kids over the wealth of the parents.
Adopted children and foster children as well since 2006 have exactly the same rights as blood children which is only right and proper.
Note – Requirements of Will stated on Page 96-97
This is called “Freedom of Testation”. Up to the 1960s a testator was free to dispose of his property as he saw fit as long as he was mentally competent.
However, in the 1960s when the Succession Bill was making its way through the Oireachtas, Charles Haughey, then a TD and Minister for Justice, argued that the right to disinherit a spouse in the family was unacceptable and that there was no real basis, moral or historical for the view that it was acceptable (p.107-108).
It was argued that the Constitution which recognises the support which a wife gives within the family home could not be reconciled with a situation where the wife could end up with nothing in the event of her husband’s death.
The Succession Act which was enacted in 1965 gives the surviving spouse a fixed share of the deceased spouse’s estate and surviving children can apply to the Courts for part of the deceased’s estate if no provision was made.
This is the same for a lot of the other topics we have discussed, there is often way too much money at stake in relation to succession planning to take a flyer on it; sit down with your Accountant and work out the implications of what you want to do. Go to someone you trust to put schemes in place to transfer assets to the next generation.
A person who dies having made a valid Will is said to have died “testate”. If you die testate, then all your possessions will be distributed in the way you set out in your Will. It is the job of the Executor or Executors you named in your Will to make sure this happens.
There are legal limits as to how much of your property goes to which person, as set out in law in the Succession Act 1965. An Executor can be a beneficiary under the Will. In other words, the Executor can also inherit under the Will.
The advice is to appoint Executors that you trust, make sure they know where your current Will is and the reality is it can be an onerous job lasting some time so they need to be ok with that.
Make sure they are the right age profile also, no point in a 40 year old appointing Executors who are 65.
You can have one or two Executors who sign your Will.
“Some Wills are not properly signed or a beneficiary signs the Will in the mistaken belief that the beneficiary had to witness Wills” (p.100)
“If a beneficiary witnesses a Will, they will not be able to benefit from that Will (this can be corrected with a codicil which is a document used to make small changes to a Will)” (p.103).
If you are in a non-marital relationship and you die without a Will, your partner has no automatic right to any share of the estate no matter how long you have been together. Many people are not aware of this, so it is very important to know your rights in this situation.
Similarly, if you are in a same-sex relationship and you die without a Will, your partner has no automatic right to any share of the estate, no matter how long you have been together.
If you are in a same-sex / unmarried relationship, there is nothing to prevent you from leaving some or all of your property to your partner in your Will. However, the tax implications are not the same as for a married couple. Also, if you have been married, your spouse may be legally entitled to a share of your estate even though you are now separated from him/her.
The Government has begun the process of recognising same-sex relationships and will be given legal recognition for the first time. This would provide such couples with security for the future, as well as provisions for inheritance and succession. However “it is doubtful they (the Government) will introduce civil marriage for gay couples due to the potential problems with the Constitution.” (p72).
If the Will sets up a trust for young children, then it must also appoint trustees (and preferably guardians).
It should state clearly who is to receive what and which property is to be included in the trust. It should provide all necessary powers to the trustees to enable them to carry out their duties. (p.96)
Capital Acquisitions Tax (CAT) comprises a number of important taxes. (p.52)
Gift Tax arises when a beneficiary receives a gift from a living person.
Inheritance Tax arises when a beneficiary receives a benefit when someone dies.
Trust Tax arises when assets are put into a discretionary trust. The trustees pay tax of 6% in the first year and 1% per year thereafter.
Capital Gains Tax arises on the gain made in value of the estate or property between the date of acquisition and sale or disposal. Tax of 20% is to be paid on the value of the gain.
Stamp duty, which is paid by the purchaser or a beneficiary on a gift of property, varies from 1% to 9%.
The Taxman may take 20% or one fifth of your estate if you are not careful in your decisions.
We can all receive gifts or inheritances of less than €3,000 per donor every calendar year: this does not even count in the normal threshold amounts and isn’t aggregated. No need to worry if the gift or inheritance you receive is less than this amount.
Its Self Assessment: You need to make a return if the gift or inheritance that you receive is 80% of the threshold (say €400k of the €500k for parent to child). Penalties for failure to make a return are quite severe at €2,535 and even worse for fraudulent returns €6,345 and a possible prosecution.
When it comes to Wills and inheritance, the key is residence and the general rule is that assets are liable to Irish inheritance tax (capital acquisitions tax) if the donor or the beneficiary is Irish resident.
Otherwise, only property located in the State is liable to the Irish inheritance tax. Thus, if you were to remain domiciled it the US, the Irish home you are building would come under Irish inheritance tax rules but not your US assets.
There is a double taxation agreement between the US and Ireland, agreed in 1997, which is designed to avoid incidences of double taxation.
Not a lot of people are aware of this exemption.
Essentially a donor can gift a house tax free if whoever receives it has no other house and they have occupied the house as their main residence for 3 years before they get it and continue to occupy the house for 6 years afterwards.
So for example a parent could set up a child in a house if they were away at college for 3 years, then gift the house to them tax free as long as they stay in it for another 6 years.
Yes – “Business Relief” means that the value used for any qualifying business
assets (premises, plant and machinery, vehicles, equipment etc.) are reduced by 90% so for example a business worth €5m is reduced to €500k which is exempt anyway.
You need to be careful of what are referred to as Bad Assets, i.e. assets which are owned by the family company but are not qualifying assets, say an investment property. These probably should be held outside the company and transferred using the dwelling house exemption (as discussed in previous point 11).
The Favoured Nephew or Niece:
If a Nephew or Niece has worked fulltime for 5 years in the trade, business or profession then they are treated as being a child for the purposes of CAT and they can take exemption of the €500k threshold : very important as normally they would only be entitled to €50k. Also the minor grandchild of a deceased child is treated as a child also and can take a threshold of €500k rather than €50k.
There may be other exemptions available such as the charitable exemption: donations or bequests to charities are tax free.
Another good tip is that if you are lucky enough to win €5 million on the lotto: you really should be operating a family syndicate and claiming on that basis; as you will have a real headache transferring that cash around the family if you claim it as an individual.
Final point : reasonable maintenance paid to children or grandchildren for education and living expenses is never taxable and people should not be worried about that.
Eight out of ten Irish farmers have still not identified a successor to take over their land after they are gone and fewer than half have even made a Will –despite the severe financial difficulties and strife that can result. According to John G. Murphy the result will be many more costly and divisive legal battles within families in the coming years :
“I foresee an increased number of visits to the High Court to sort out expensive claims as a result of higher divorce and separation settlements and as a result of the increased transience of marriage contracts … There is a need for a new, imaginative approach by Government and by individual people to family farm succession … The key is, I believe, in communication. Lawyers generally would do well to make a communication and mediation service a major part of their service to farm families and indeed to everyone who has a home whether in urban or rural Ireland” he said.
Murphy “I can understand the fear and reluctance of farmers and farm wives to hand over or transfer their land. They fear what will happen in their old age and if provision can be made for their needs when they are no longer able to care for themselves. They fear for all of their children.”
This works in the same way was business relief, agricultural assets are reduced by 90% so a farm worth €5m is reduced to €500k in the eyes of the Revenue which should be exempt.
In order to qualify here, the donor must be a qualifying farmer and “it is no use just pulling on the wellies” when you are on your way into the tax office : in order to be a farmer in the eyes of the Revenue then 80% of your gross assets must be agricultural assets.
Both business relief and agricultural relief are subject to clawbacks if the business or farm are sold within 6 years. You have to keep and run the farm or business for 6 years to claim the exemption.
“In most cases a vulnerable person will be influenced or put under pressure by someone else close to them” (p96)
“If it was proved that a Will was made in favour of a particular person by coercion or “under influence, a Court can ‘strike down’ that Will.”
If you die without making a Will – “intestate” – the next of kin needs to apply to the High Court to be appointed as Administrator in the Estate. The Administrator does the same job as an Executor but as there is no Will he/she is obliged at law to administer the estate in accordance with the rules of intestacy.
E.g. If you are married with no children – spouse takes all.
If you are married with children – the assets are distributed under the Succession Act – two thirds to the surviving spouse and one third to the children.
A claim can only be brought when there is a valid Will. If the parent has made no Will, there is nothing to challenge as all the children will receive a set share of the estate under the intestacy provisions (p.115)
The book warns those who feel they have been hard done by in the succession of land against taking precipitive legal action.
“Taking a legal action is expensive stuff. If someone decides to take legal advice for the purpose of commencing a legal claim they should always ask for a written opinion from their Lawyer before they start the Court case and get it in writing.”
“Everyone likes to know about the strong points in their case but they should always remember to ask about the weak points as well.”
“When people go to Court there are no real winners …. it should be avoided if possible.” (p.96)
Yes – some bookshops / stationery shops will sell “do it yourself” kits.
However Solicitors and Lawyers generally find that DIY Wills have caused difficulty.
Some are badly drafted or worded. The construction of simple words and sentences can convey many different meanings, while some Wills are not properly signed or a mistaken belief that the beneficiary has to witness Wills (p.100).
The advice in the book is to go to a Solicitor when making your Will – “even a Solicitor will go to another Solicitor to make their own Will.”
More and more business papers and supplements are advertising spread betting as an exciting way to gamble on the stock market. But what is it all about and is it just the stock market that you can gamble on ?
McDowell and Co. Accountants, outline the background to this new craze:
Advantages of Spread Betting
* Tax Laws are subject to change.
Disadvantages
What can I trade?
Because you are not actually buying or selling the actual underlying instrument. the range of instruments that you ‘bet’ on can be far greater than simply underlying shares.
You can bet on the spread bet of:
How does a Spread Bet work?
A spread bet is a bet on the future movement of an underlying instrument. In basic terms if you believe the underlying instrument is going to rise you place a buy bet, if you believe the underlying instrument is going to fall you place a sell bet. Unlike ordinary share trading you can befit from falling as well as rising shares or other financial instruments.
A spread betting company will quote you two prices for any underlying instrument a Bid (the price that you can sell at) and a ‘offer’ just like you would for a normal equity (the price that you can buy at)the difference between these is known as the spread.
The movement of the underlying instrument is measured in points eg. For equities 1 point = 1 pence for indices usually 1 point = £1 and you can place a bet of any value against every point movement in the underlying i.e. £1 per point, £5 per point or £10 per point etc.
To close a bet you simply place an opposite bet on the specific instrument at the same £ per point. To close a buy bet you sell at the current quote and to close a sell bet you buy at the current quote.
Therefore the profit or loss that you make is the points difference between the opening bet and the closing bet multiplied by the value of your bet per point (i.e. £1 per point, £5 per point or £10 per point etc.)
The best way to understand how a spread bet works is to look at an example
» Ordinary Share Spread bet Example
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The theory of spread betting is exactly the same whatever instrument you wish to trade on, one of the most popular forms of financial spread betting is on world indicie such as the FTSE 100 or The Dow Jones :
The FTSE 100 is currently trading at 4367 and XYZ spread.com is quoting a spread of 4363 – 4370 on the Daily FTSE.
Investor A believes that the FTSE is going to rise and places a buy bet at 4370 for £5 per point
A week later the FTSE has risen and the daily FTSE spread is now 4400 – 4406
Investor A decides to place a sell bet at 4400 to close out their position, and they make a profit of £150 (30 points x £5) Conversely, The FTSE falls and the current FTSE spread is now 4330 – 4336 and Investor A decides to close out his position by placing a sell bet at 4330 and makes a loss of £200 (40 points x £5) |
Cost and Margin Requirements
How much does a spread bet cost?
When placing a spread bet the only costs involved are included within the spread, so effectively the wider the spread the more expensive it is to trade.
How much money do I need to place a bet or trade?
Spread betting is traded on margin, which means that you simply need to place a deposit when you open a trade of only a % of the positions total value.
If we compare a spread bet and an underlying share trade a Buy bet on Vodafone at 1.30 for £1 a point is the equivalent of buying 1000 shares at 1.30, if Vodafone rises to 135 bid you would make a profit on the shares of £50 (1000 shares x 5p) with a spread bet you would also have made £50 (5 points x £1).
However in order to buy the actual shares in the traditional manner you would have to pay the full value of £1300 before commission or stamp duty. With a spread bet there will be a deposit requirement based often called margin requirement or notional trading requirement on the value of the trade this will differ between different underlyings and different spread betting companies eg.
The margin requirement on Vodafone is 10% and the amount to pay initially is calculated as follows (£ per point x total number of points) x .10% i.e. £1 x 130 points = 1300 x .10 = £130
Therefore, to open a buy bet on Vodafone at 130p for £1 a point it would require an initial deposit of at least £130
Spread betting companies often offer two types of account a deposit account where you have to have enough money to cover the notional trading requirement on your account or a credit account where by you have a set level of credit against the notional trading requirement. However margin requirement per stock will be important as it will ascertain what size bet that you can open.
Margin Call
If a position moves against you, you may have to pay additional money over the initial deposit this is know as margin or margin call and will be made by the spread betting company if your open positions are running at a loss over and above the . It is therefore advisable that you do not open positions that require all your available funds as an initial deposit or you may be forced to close your position if you can not pay the required margin
It is possible to set certain levels that if reached will automatically open or close a position .
Limit Order
A Limit order is one that is executed at a better price than the prevailing price, ie for a buy bet when the stock drops to a certain level or for a sell bet when the stock rises to a certain level.
| Example: The FTSE spread is currently trading at 4400 – 4406Investor A wishes to place a £10 a point trade with a limit of 4390, therefore they do not wish the order to be opened unless the FTSE spread offer reaches 4390.This order is held by the spread betting company
Two days later the FTSE spread is 4384 – 4390 and an opening trade of £10 a point is opened at the limit level of 4390. |
Stop orders
A stop order is one that is executed at a worse price than the prevailing market price one of the most common uses of this is a stop loss order. It is possible to make substantial profits when placing spread bets as well as substantial losses which is why many spread betting firms allow you to place a stop loss when you open a trade:
A stop loss is a price level set by the client on a particular trade that if reached automatically closes out the particular position at the desired price.
| Example: Barclays is trading at 515 – 520Investor A and Investor B both believe that Barclays will rise and both place a buy bets at 520 for £10 a point. However, Investor B also places a stop loss when he opens the trade at 500.
The following day Barclays drops steeply during the day trading down from 515 to 450.
Investor A has not been watching the price of Barclays all day and therefore when he checks the price at the end of the day it is now 450 – 455 and he is running a £700 loss (70 points x £10). Investor B has not been watching the market either however his position has been automatically closed out at his stop loss level of 500 limiting his loss to just £200 (20 points |