Terminal cancer diagnosis. Outstanding tax bill

[Beachcomber]

A work colleague and friend called me today to say he is terminally ill with less than 12 months life expectancy.
Apart from the devastating personal aspect he is very concerned about the financial implications for his family.
As an accountant he has asked me to assist him. However, I have no experience in this area so hopefully someone here can provide some advice.
He is a contractor (not an employee). His mortgage is circa €300k and he has life assurance to pay off the balance when he dies. As far as I am aware he has no other life assurance policy.
He has circa €50k in a pension scheme. He is 56 years old.
He had 2 kids, the youngest about 8 years old.
His main concern relates to a tax bill. He is on a repayment plan with Revenue for the last 12 months but still owes approximately €50k. His wife does not work but is in receipt of a disability allowance.
I understand that a tax bill stays with the estate on death. However, would Revenue force a house sale to cover the liability? What happens the pension when he dies? From a financial perspective is there anything he can do now to reduce the financial burden on his family when he dies? Can anyone recommend an advisor who could assist him?
Thanks all.

 

[Steven Barrett]

Most life cover plans pay out early on terminal illness. He should start the process getting that paid out early. Mortgage protection plans assume an interest rate of 6% per annum, so the cover goes down as if that was the interest rate. As the actual rate has been lower, there should be a surplus amount of life cover that will be paid. This may be enough to cover the tax bill.

The pension should also be payable early at a tax rate of 10%. If left until after death, no tax is paid at all but it has to go through probate, which usually takes about a year. Again, this can be used to discharge the tax liability.

An accountant or someone who deals with the Revenue on a regular basis may be able to advise on dealing with the Revenue. I am sure they will agree a repayment plan if there are no assets to pay the bill outright. Kicking a widow out of her home over a relatively small amount isn't the kind of attention that they want.

I would start with mortgage protection plan and check how much cover there is in place. That could solve the problem.

Steven
www.bluewaterfp.ie

 

[Beachcomber]

Most life cover plans pay out early on terminal illness. He should start the process getting that paid out early. Mortgage protection plans assume an interest rate of 6% per annum, so the cover goes down as if that was the interest rate. As the actual rate has been lower, there should be a surplus amount of life cover that will be paid. This may be enough to cover the tax bill.

The pension should also be payable early at a tax rate of 10%. If left until after death, no tax is paid at all but it has to go through probate, which usually takes about a year. Again, this can be used to discharge the tax liability.

An accountant or someone who deals with the Revenue on a regular basis may be able to advise on dealing with the Revenue. I am sure they will agree a repayment plan if there are no assets to pay the bill outright. Kicking a widow out of her home over a relatively small amount isn't the kind of attention that they want.

I would start with mortgage protection plan and check how much cover there is in place. That could solve the problem.

Steven

Thanks Steven.

 

[Marsupial]

He should make sure that his PRSI is paid up to date (possibly as part of the Revenue settlement?) so as to ensure that his widow will be able to avail of the survivor's contributory pension, plus the extra for the child dependants.

 

[DingDing]

The Mortgage protection insurance policy should have included a schedule on the amount they will pay for each month. This could be compared with the outstanding mortgage and let you know of there is any excess.

Fair play for helping your colleague, Not easy but potentially will make a big difference to his family and give your colleague some re-assurance.