Using an inheritance well at our stage of life

T

Tempo66

Registered User
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Personal details

Age: 60
Spouse’s/Partner's age: 66
children grown up

Income and expenditure
Annual gross income from employment €55k

Annual gross income of spouse: retired – very minimal state pension (long story)
Monthly take-home pay €3500

Summary of Assets and Liabilities
Mortgage paid off. Home worth c. €450k at the moment
Cash of €40k. 30k of this in a self-managed Irish Life portfolio.
Work Pension fund €300k
No debts / loans

Savers rather than spenders

Other information which might be relevant
Inheriting c. €240k (in sterling, from UK). No IHT to pay I assume since below threshold of €335k from parent.

What specific question do you have or what issues are of concern to you?

Glad of advice. Fortunate enough to have mortgage paid off and coming into some family inheritance. Modest regular income and modest retirement future income. I am the sole earner effectively.

  • I’m thinking of maxing out employment pension AVC contribution until I retire. Advice on whether to pay in a lump sum now as well?
  • I should have close to a full Irish state pension when I retire
  • Have enough years in UK for 50% UK state pension. Thinking of paying voluntary contributions to get full state pension (offer to pay back to 2006 closes in July 2023). Have sent off form applying to do so and asking if I qualify for (much cheaper) class 2 contributions. If class 3 (close to €1000 per year) it could cost c. €17k. Still well worth it, it seems. Would be paid off in 3-4 years after pension starts and I am in good health and family long lived. Any pitfalls here?
  • We’d like to give gifts to adult children, maybe €50k each. They are trying to save for buying somewhere to live in this dysfunctional housing market. Are there tax issues here? The IHT tax threshold from a parent is €335k – can 50K be put against this threshold now? I know the annual tax threshold is c. €3K. Is it worth considering setting up a trust or other financial mechanism for each adult child?
We’ve been looking at apartments in the North – good value and family connections there. But obviously that would use most of the inheritance (c. €180k) in another way. Probably not a good idea I think, although tempting since we may retire there.
 
Tempo66 said:
I’m thinking of maxing out employment pension AVC contribution until I retire. Advice on whether to pay in a lump sum now as well?
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Yes, you should maximise the AVC.

You will get just 20% tax relief on the contributions. But you will get 25% of it back tax free fairly soon, so it looks as if it's still worthwhile.

I don't see the value of paying in a lump sum now.

I don't think you will be on the 40% tax bracket in retirement, but check that out. Not sure about getting tax relief at 20% only to pay 40% on drawdown.

Brendan
 
Tempo66 said:
We’d like to give gifts to adult children, maybe €50k each. They are trying to save for buying somewhere to live in this dysfunctional housing market. Are there tax issues here? The IHT tax threshold from a parent is €335k – can 50K be put against this threshold now? I know the annual tax threshold is c. €3K. Is it worth considering setting up a trust or other financial mechanism for each adult child?
Click to expand...

You have enough for yourselves, so this should be the priority.
IHT is a UK tax. In Ireland it's called Capital Acquisitions Tax or Gift Tax.

You can give each €335k. If you give them €35k now, you can still give them up to €300k later.

Helping them to buy a house should be your financial priority. You don't say how many children you have.
I would not give €50k now to someone who is saving up to buy a house. They might blow it.
When their plans are advanced, you should probably lend them €100k interest only.
If you ever need it again, they would return it to you.

For example, you might lend the first one €100k on the understanding that they repay some of it to you, when you want to help another one onto the housing ladder.

Brendan
 
Firstly, is there anything you need to do in your own home to future proof it and from an insulation/energy efficiency perspective. Are there any other big spends, car change etc, that you need to consider.

Secondly, you have or potentially will have an estate worth €700k plus, make sure you have a will in place

UK pension is important, if they do say Class 3 at the higher rate, there is an appeals process, I got mine downgraded to the lower level by following it and it was painless. See seperate threads on here regarding that

Can you or do you want to retire early? Is there the holiday of a lifetime to take that you can now afford?

If you are going to retire to the North, will you sell the house or pass it to one of the kids. ?

You are right to consider giving them cash now as if you ever had to avail of Fair Deal, that will eat it up quite quickly
 
Thanks for comments.

Yes we do have a will and am actually in the process of updating

Will have to check what you say Brendan on pension "I don't think you will be on the 40% tax bracket in retirement, but check that out. Not sure about getting tax relief at 20% only to pay 40% on drawdown". I guess that could also be a drawback about putting money into the UK pension if it brought us into the 40% bracket.

On the AVC, I'm not very informed about pensions, I assume you can't contribute retrospectively?

I'm not planning to retire early - enjoy job and probably can't afford it anyway. Do plan to travel as we can. If we do retire north we could buy more cheaply up there and have spare cash to give to kids at that point too etc.
 
Tempo66 said:
guess that could also be a drawback about putting money into the UK pension if it brought us into the 40% bracket
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I definitely wouldn't consider this as a drawback to paying your contributions for UK pension.

Its likely the best pension deal going at present.
 
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