Q&A Dominic Coyle

My query relates to the amount a child may inherit from both parents . I gave my two daughters €100,000 each towards buying an apartment in 2007. At that time, the tax threshold was very high – in the region of €450,000.

As the threshold is much lower now, I was wondering has that sum of €100,000 to be included if they were to inherit again? Would the tax threshold that pertained at the time apply to the first sum?

Ms AF, email

As you say, back in 2007, the threshold under Category A of the Capital Acquisitions Tax code – which govern gifts and inheritances to a child from a parent – was very high, €496,824 in fact.

Not surprisingly, as recession and austerity bit in the wake of the financial crisis, the Government moved fairly dramatically to reduce this figure (and the related thresholds for categories B & C covering other relationships and none between the person making the gift/inheritance and the recipient).

As of now, the category A threshold stands at €225,000. This threshold is cumulative, in that the beneficiary of a gift or inheritance has to keep track of all the money or value of assets they may have received from someone in each category.

So, yes, the gifts you made to your daughters in 2007 do still count. This means that each of your daughters has just €125,000 left before they reach their threshold.

The fact that, at the time the gift was made, the threshold was higher has no bearing on it, and no, you cannot “freeze” that €100,000 gift at the 2007 threshold level.

In addition to lowering the threshold, the Government has also raised the rate of capital acquisitions tax. Once a person exceeds their threshold, they will have to pay 33 per cent CAT on the balance.

It is worth noting, however, that you can still gift €3,000 a year to each daughter for any number of years, without it being taken into account in assessing their position
vis-a-vis the threshold. This is known as the small gift exemption.

Joint accounts and the savings guarantee

The question of the Deposit Guarantee Scheme has been subject to discussion recently. The guarantee that the first €100,000 of savings in any bank covered by the scheme is protected by the State and also, as I understand it, endorsed by the EU.

Can you confirm that savings in a joint account up to a maximum of €200,000 are also subject to the same guarantees? I ask this as all recent discussions/press comments refer to the maximum of €100,000 without reference to joint holdings .

Mr CF, Dublin

The Deposit Guarantee Scheme is the State underwritten protection offered to depositors in Ireland. Similar schemes operate across the EU. The threshold in the scheme, which used to be in the region of €20,000 was raised to €100,000 shortly after the outbreak of the financial crisis.

For avoidance of confusion, the €100,000 threshold is per person and per institution. Thus if you had €100,000 in AIB and a further €100,000 in Bank of Ireland, you would be covered in respect of both amounts.

Equally, if you have a joint account in an institution, you and the other signatory each have protection for up to €100,000 – making it €200,000 between you, as long as neither of you has other deposits with that same institution.

Finally, it is worth noting one anomaly with the scheme, Although AIB now owns the former EBS Building Society, the Revenue has confirmed that you will be covered up to €100,000 in each institution, despite their common ownership.

Any alternative to old An Post savings rates?

The NTMA recently decided to cut interest rates on An Post savings products – by up to 40 per cent, for instance on new three-year savings bonds. That cut and another one earlier this year makes such products a lot less attractive.

Can you advise whether there is an at least as attractive alternative with State guarantee and tax free – for instance in the UK? And is there any impediment by either Irish or UK authorities to my buying across the Border?

Mr MC, Dublin

The suspicion is that the NTMA was pressed to cut rates on State guaranteed products by the commercial banks as, though desperate to increase their deposit bases, they were finding it impossible to compete with the rates on offer at An Post.

As a broken banking system is of no advantage to the NTMA, among others, it’s hardly surprising that it will have chosen to act as it did, frustrating as it certainly is for savers, like yourself, who have relied on the State guaranteed and tax-free returns on offer, not least during the recent financial crisis.

Is there anything equally attractive, protected and tax free on the market as the old rates? Not that I’m aware of at the moment.

Is there anything to stop a person putting their money into savings outside the Border? Not as long as that money comes from taxed income and that any interest or other gains are reported to the Revenue by way of your annual tax return.

Of course, foreign institutions (especially State-backed capital guarantee ones) may have their own rules. Many only allow people tax resident in those countries apply.

It’s worth bearing in mind in relation to the UK especially that you will need to weigh your appetite for the foreign exchange risk. Anything you gain in interest rates could be lost in converting the money into sterling on entry and back into euro when you withdraw it.

This column is a reader service and is not intended to replace professional advice. Please send your questions to Q&A, c/o Dominic Coyle, The Irish Times, 24-28 Tara St, D2, or to dcoyle@irishtimes.com