# Couple, 70s, €2m in bank, seeking inflation protection



## basilbrush (28 Sep 2022)

We are a married couple, both about 70. We own a house, a holiday home, and about 50 acres of land that is rented out. We have grown and independent children (to whom we give the maximum tax-free gift each year). We have no debts or other liabilities, and about €2m that is currently in a bank account. We both receive partial state pensions. We enjoy living relatively frugally, so about €20k in spending per year is enough for us to live comfortably.

While we could probably continue on the current path without any worries, we are interested in better protecting our savings from inflation and perhaps earning a slightly better (but low risk) return on them. If there are changes that would make it more efficient for our children to inherit from us, we are also interested in those.

We are uncomfortable with the managed funds that most investment companies advertise, as they seem complex and opaque. We prefer simple products that we can understand, such as index-tracking passive funds. Vanguard's 40/60 LifeStrategy distributing ETF (40% global equities, 60% global bonds) would probably be ideal if it were not so tax inefficient (especially the dividends being taxed at 41%). Investment trusts have received attention on here recently as a tax efficient alternative to provide the diversification of ETFs, but the ones that we have looked at feel risky as their investments are concentrated in a small number of growth companies that seek high returns, and have the risk of generally being based in the UK which might lead to complications in the future. Berkshire Hathaway has also been proposed, but we do not wish to risk being subject to US Estate Tax.

We are considering evenly dividing a substantial portion of our savings between the ten largest companies listed on the Irish stock exchange that have wide geographic exposure (CRH, Ryanair, Smurfit Kappa, etc., but not Glenveagh, for example, as it is focused on Ireland). If we used €1m for this, I expect that it should generate dividend income of about 2% (some companies pay less, or none, but others pay more), which should more than cover our living expenses (when combined with the pension and land rental income). We could then invest €500k in the accumulating version of the Vanguard 20/80 ETF (equities exposure decreased to 20% to compensate for our equity exposure through directly held shares), accepting the taxation inefficiency (and additional work of applying the deemed disposal rule every 8 years) as the cost of lowering risk through greater diversification. We would keep the remaining €500k in a savings account for reassurance. We are comfortable with the somewhat increased volatility compared to our current situation.

One of our concerns with this proposal is that it results in a substantial portion of our wealth being in the type of investments (shares, ETFs, second house) that are likely to be targeted for increased taxation by parties such as Sinn Fein and PBP, should they get into power in the (potentially quite near) future.

Your thoughts would be appreciated. Thank you.


----------



## Marc (28 Sep 2022)

I would generally suggest either inter-family loans or a family partnership in these circumstances.









						Everlake Estate Planning Guide Tax Year 2021
					

This guide examines the essential elements of estate planning with a focus on financial, legal and tax considerations.




					everlake.ie
				





Lending the money to the next generation now allows them to make use of it immediately (repaying mortgage loans or making pension contributions) but allowing you to have the loan repaid back to you if you need the money in the future/to provide capital for spending.

The benefit of this is that all of the upside growth accrues to the next generation and is therefore free from CAT.

You can forgive the loan in instalments using the small gift exemption as you are doing currently

You can also invest tax efficiently via a portfolio of non-EU ETFs either with a sustainable investment approach or a low-cost "market" portfolio









						Tax Efficient, Sustainable Investing Portfolios - Everlake
					

A new range of tax optimised investment portfolios, providing broad exposure to global capital markets, is now available to our clients.




					everlake.ie
				




I have developed a bespoke solution to address the US Estate Tax issue

This would make use of any income tax reliefs and exemptions that you currently have and not using to the maximum and would be considerably less risky than a collection of single company shares or a UK Investment Trust portfolio and more tax efficient than a fund subject to exit tax at a flat rate of 41% as you note.

But you should be careful who you ask for advice as nothing has really changed in my 30 years as a financial planner and I’d be extremely wary of anyone recommending traditional wealth managers

As Woody Allen said;
“A stockbroker is someone who invests other people’s money until it is all gone.”​
Or as William Bernstein puts it

"The stockbroker services his clients in the same way that Bonnie and Clyde serviced banks."


----------



## 50andOut (28 Sep 2022)

Welcome back Marc


----------



## Paddy1981 (28 Sep 2022)

Good to see you back Marc. Always enjoy your posts.


----------



## PebbleBeach2020 (28 Sep 2022)

I would suggest giving each child their maximum inheritance amount €335,000 now. And I assume you are giving €3,000 to each person in your son/daughters family?

So, if you son is married and has 3 kids. You and your wife can in effect give me, his wife and three kids the sum of €30,000 a year tax free. The money will need to be put in the grandchildrens accounts but if you have 2 or 3 kids and half a dozen grandchildren, you can see how you can start directing money to avoid inheritance taxes down the line. You can continue this approach until you have a couple of hundred thousand left.

I would also suggest doing to immediately, to avoid the 5 year rule in case of Fair Deal and nursing home fees (I think it's 5 years rule, or maybe its 3 year?)


----------



## noproblem (28 Sep 2022)

basilbrush,​A little off topic from what you're asking but I've noticed you're spending very little. I would prioritise private health insurance if you don't have it already. Sorry if you feel I'm intruding.


----------



## Sarenco (28 Sep 2022)

Agree with @noproblem - spending just €20k pa for a couple is extremely frugal given your resources.

In your 70s, you should really be thinking of putting gold-plated health insurance policies in place - you can definitely afford it.

Given your level of assets and ages, I think you should be talking to a wealth manager like Brewin Dolphin.


----------



## AndroidMan (28 Sep 2022)

Is buying good quality household appliances, washing machines, tv's etc for your family members, stuff that will last, considered tax avoidance?


----------



## noproblem (28 Sep 2022)

AndroidMan said:


> Is buying good quality household appliances, washing machines, tv's etc for your family members, stuff that will last, considered tax avoidance?


No problem with tax avoidance, it's tax evasion they don't like.


----------



## ClubMan (28 Sep 2022)

noproblem said:


> No problem with tax avoidance, it's tax evasion they don't like.


Actually, they don't like certain tax avoidance either.
E.g. transactions which are technically legit but which are mainly or solely structured to avoid paying tax.


----------



## Mamamia22 (28 Sep 2022)

Why not spend some ? Maybe a nice long extended holiday or two ? Don’t have regrets. I don’t know all the ins and outs of avoidance but if I was in your shoes I’d do my best to make sure revenue would not hoover up a large chunk after I pass on. I would pay for professional advice. I assume you worked very hard to accumulate such a sum. Enjoy it a bit more in some way.


----------



## magsd57 (1 Nov 2022)

Have to say BasilBrush, you two are impressive


----------



## Look ahead (1 Nov 2022)

At 70 you have approx 5 or 6 years left to really enjoy that money, after age 75 or 76, the body  slows down considerable and that's if, you don't already have the usual ailments, high blood pressure, arthritis diabetes etc. I would do  all the travelling I haven't done to date within the next five years cos after that, you will be in the rocking chair in front of the fire and then the state pension would adequately cover your needs. I never saw pockets in a shroud or a hearse with a hitch


----------



## bmount (1 Nov 2022)

Get out there and spend it. Go to Aus Open tennis, Olympics and Greenland most of us wont get to do that


----------



## jpd (1 Nov 2022)

What rubbish - you have no idea of the state of their health or otherwise - plenty of people live healthly lives into their 70, 80s and even beyond


Look ahead said:


> At 70 you have approx 5 or 6 years left to really enjoy that money, after age 75 or 76, the body  slows down considerable and that's if, you don't already have the usual ailments, high blood pressure, arthritis diabetes etc. I would do  all the travelling I haven't done to date within the next five years cos after that, you will be in the rocking chair in front of the fire and then the state pension would adequately cover your needs. I never saw pockets in a shroud or a hearse with a hitch


----------



## demoivre (1 Nov 2022)

bmount said:


> Get out there and spend it. Go to Aus Open tennis, Olympics and Greenland most of us wont get to do that



Some folks get enjoyment out of living frugally. Having the money there is what gives them the warm, fuzzy feeling.


----------



## ClubMan (1 Nov 2022)

demoivre said:


> Some folks get enjoyment out of living frugally. Having the money there is what gives them the warm, fuzzy feeling.


They could live for 100 years on €2M at €20K p.a. never mind the rental income and capital appreciation of the land! Inflation protection is the last thing that they should be worrying about!


----------



## Zenith63 (1 Nov 2022)

jpd said:


> What rubbish - you have no idea of the state of their health or otherwise - plenty of people live healthly lives into their 70, 80s and even beyond


Plenty may, most do not.

The predicted healthy life years at birth for females in Ireland was 70.5 years in 2019, the third highest rate in the EU27 and 5.4 years above the EU27 average. *Male healthy life years at birth in Ireland in 2019 was 68.6 years*, the fourth highest rate in the EU27 and 4.4 years higher than the EU27 average.  CSO


----------



## Look ahead (1 Nov 2022)

Zenith63 said:


> The predicted healthy life years at birth for females in Ireland was 70.5 years in 2019, the third highest rate in the EU27 and 5.4 years above the EU27 average. *Male healthy life years at birth in Ireland in 2019 was 68.6 years*, the fourth highest rate in the EU27 and 4.4 years highe



Worse than I thought so...


----------



## T McGibney (1 Nov 2022)

Zenith63 said:


> The predicted healthy life years at birth for females in Ireland was 70.5 years in 2019, the third highest rate in the EU27 and 5.4 years above the EU27 average. *Male healthy life years at birth in Ireland in 2019 was 68.6 years*, the fourth highest rate in the EU27 and 4.4 years higher than the EU27 average.  CSO


Is that an average or a median?


----------



## Look ahead (1 Nov 2022)

jpd said:


> What rubbish - you have no idea of the state of their health or otherwise - plenty of people live healthly lives into their 70, 80s and even beyond


I was talking in general terms. When you 75+ people do not have the energy of a 40 or 50 year old. 

Who is Defined as Elderly? Typically, the elderly has been defined as the chronological age of 65 or older. *People from 65 to 74 years old are usually considered early elderly*, while those over 75 years old are referred to as late elderly.21 Aib 2021


----------



## demoivre (1 Nov 2022)

ClubMan said:


> They could live for 100 years on €2M at €20K p.a. never mind the rental income and capital appreciation of the land! Inflation protection is the last thing that they should be worrying about!


You won't change the mindset of some people. My mother would only heat one room in her house after my father died even though she could afford to heat the whole house 24/7. She preferred going to bingo than going to the Olympics or visiting Greenland! Each to their own though!


----------



## Look ahead (1 Nov 2022)

ClubMan said:


> They could live for 100 years on €2M at €20K p.a. never mind the rental income and capital appreciation of the land! Inflation protection is the last thing that they should be worrying about!


My exact thoughts on the situation too.


----------



## NoRegretsCoyote (1 Nov 2022)

T McGibney said:


> Is that an average or a median?


It's life expectancy at your current age that matters, not life expectancy at birth.


----------



## ClubMan (1 Nov 2022)

demoivre said:


> You won't change the mindset of some people. My mother would only heat one room in her house after my father died even though she could afford to heat the whole house 24/7. She preferred going to bingo than going to the Olympics or visiting Greenland! Each to their own though!


I agree. And each to his/her own.
But they really shouldn't be worrying about inflation protection, or their finances at all, in their situation.
Until/unless they start living well beyond the €20k p.a. (excluding family gifts) budget.


----------



## Conan (2 Nov 2022)

NoRegretsCoyote said:


> It's life expectancy at your current age that matters, not life expectancy at birth.


Correct. For a 70 year old, the average life expectancy is c 16 years for a male and 20 years for a female.


----------



## KOW (2 Nov 2022)

basilbrush said:


> We are a married couple, both about 70. We own a house, a holiday home, and about 50 acres of land that is rented out. We have grown and independent children (to whom we give the maximum tax-free gift each year). We have no debts or other liabilities, and about €2m that is currently in a bank account. We both receive partial state pensions. We enjoy living relatively frugally, so about €20k in spending per year is enough for us to live comfortably.
> 
> While we could probably continue on the current path without any worries, we are interested in better protecting our savings from inflation and perhaps earning a slightly better (but low risk) return on them. If there are changes that would make it more efficient for our children to inherit from us, we are also interested in those.
> 
> ...



I have no doubt a lot of hard work has gone into this strong financial position.
Age and all that are very relevant to the discussion.
Where and what is done with the wealth regarding both themselves and the children is also important,
But It is stated that they enjoy living fairly frugually. Nothing wrong with that if thats what floats their boat.

They are asking how best to protect the savings going forward most probably with succession in the back of their minds.
Should they have a change in lifestyle and turn around and start doing the big trips etc protection of the wealth is still very relevant.
No matter what the situation after working hard nobody wants the beasts of inflation or taxation to attack.


----------

