Please send your queries to Dominic Coyle, Q&A, The Irish Times, 11-15 D'Olier Street, Dublin 2, or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.
Property
A few years ago my wife acquired a semi-derelict town house. Shortly afterwards, I took early retirement and had the house renovated with my lump sum together with a bank loan. The house is still in my wife's name. Could you please tell us the fees/costs involved in transferring it into our joint names? The house is now let out.
Mr L.MacN., Sligo
The costs involved in the transfer you are looking to undertake essentially fall under the heading of legal fees. I am assuming there is no dispute about the deeds/title of the property or the move to transfer it into both names. In such a case,the costs involved are your solicitor's time in drawing up the necessary legal paperwork.
If you wanted to transfer the property into joint names outside a marital arrangement, the situation might well be more complex and bring into play issues of capital gains tax, stamp duty and/or capital acquisitions tax, but that is not an issue between spouses.
The fact that the house is currently let has no bearing on the transaction you wish to execute.
Inheritance tax
If I were to die in the near future, what would my "death duties" be? If substantial, how could I mitigate them?
I am a pensioner of 70-plus and a widower for more than 20 years, living alone. My next-of-kin are my two children, both of age. One lives in Dublin, the other in England. My will leaves everything equally between them.
My present assets are:
my home, an unencumbered freehold property worth £450,000;
its contents plus a car, etc, valued at £30,000;
investments of different sorts worth £276,000;
cash of £14,000.
That makes a total estate of £770,000. I have no debts.
Between 12 and 15 years ago, I gave £15,000 to each of my children to help them purchase their own homes.
Mr T.L., Dublin
The good news is that the abolition of probate tax in the recent Budget means your estate will no longer face a 2 per cent charge on its value before anything can be disbursed.
Turning to the other main tax on the transfer of assets upon death - capital acquisitions tax (CAT), more colloquially known as inheritance tax - changes in recent budgets work in your favour.
In the first place, the thresholds below which no CAT is payable have been raised considerably. In the case of the transfer of assets to offspring, the threshold now stands at £300,000. Given that you are bequeathing your estate to your two children, that means together they could receive up to £600,000 before paying any CAT.
Of course, you will have to take into account the £15,000 already given to them some years ago, of which £500 would not be taxable anyway for reasons outlined further below.
As such they could each receive £284,500 free of tax. That leaves a balance of £199,000 in your estate at current valuations.
CAT is levied at a flat rate of 20 per cent on this sum - another of the reforms in recent budgets, which did away with sliding scales of CAT. Thus the tax liability on your estate would be £39,800.
That is a not inconsiderable sum but, in the context of an estate worth £770,000, a tax charge of 5.17 per cent could hardly be considered exorbitant.
However, there are ways you can reduce this sum still further. You do not say whether your children have any children of their own. If so, you could bequeath part of your estate to them. Each grandchild is entitled to receive £30,000 free of CAT. The same goes for any siblings you yourself may have and for any nephews and nieces. Of course, the £30,000 entitlement is cumulative, as with all these thresholds. Any previous gift/inheritance would reduce the tax-free amount any individual could receive. In addition, non-relatives can receive up to £15,000 free of inheritance tax.
The first £1,000 of gifts from any individual in any given calendar year are also tax-free. Prior to 1991, the figure was £500, hence the deduction from the CAT calculated sum on the money given to each of your children to help them buy homes some years ago.
Unfortunately, you have just missed the opportunity to give such a sum in 2000, but you can still do so for this year and each succeeding year. Assuming you only gave such money to your children, the tax saving on CAT would be £400 for each calendar year. Any wider disbursements would lower the tax bill further.
Pensions
I took early-retirement from Eircom (then Telecom Eireann) two years ago at age 50 and have since been working. Am I still entitled to invest in a personal pension with associated tax benefits?
Mr. D.D., e-mail
The simple answer is yes, if your current employment is non-pensionable - i.e. that you are not a member of an occupational pension scheme in the work you are undertaking now. Your entitlement to invest in a personal pension relates to your earnings. Whether you have previously retired from a particular employment is not relevant. However, when claiming relief, you can only do so on earnings accruing from employment and not from your income under your Eircom pension.
Contributions can be made free of tax up to certain limits. Between the ages of 40 and 49, you can invest 25 per cent of net relevant earnings free of tax. At 50 or older, the proportion rises to 30 per cent.
You can normally draw down such a pension from the age of 60 and certainly by the age of 75 but you must have stopped working before you do so. The advantage of personal pension plans is that you retain control of the fund. You will have options on the risk undertaken in investing the fund. You can transfer it to an approved retirement fund when you stop work to ensure it remains under your control and that its residue passes on as part of your estate when you die.
