# Money makeover - just inherited €700,000



## horseshoe (14 Apr 2014)

Age: 42
Spouse’s/Partner's age: 47

Annual gross income from employment or profession: 48000
Annual gross income of spouse:49000

Monthly take-home pay About 4800 net

Type of employment: e.g. Civil Servant, self-employed : I'm an employee, husband is a civil servant.

In general are you:
(a) spending more than you earn, or
(b) saving?

Starting to save.

Rough estimate of value of home 150000 ( a guess, could be less)
Amount outstanding on your mortgage: 115000
*What interest rate are you paying? c.4.5% variable*

Other borrowings – car loans/personal loans etc One car loan c.14500 left.

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? 

Savings and investments:None

Do you have a pension scheme?Husband has civil service pension but has only started. 

Do you own any investment or other property? No

Ages of children: 7 & 9
Life insurance: Yes

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

We have no savings because of big changes due to recession and change of employment. I had a business which closed due to the recession, and owed 60,000, at the same time my husband went back to college to retrain and is now a full time permanent civil servant. I am an employee again and we sold our family home to pay for college and the business debt. That left us enough for a deposit on a new, smaller house and we are  basically starting over. 

My father recently died and has left me about 970,000 worth of shares in one company which is unexpected (to say the least).  After tax, I guess I will have about just over 700,000 worth of the shares. Probate is going through and will take a few months and I am looking for advice on what to do. I want to make sure that our family is secure financially for the future. And that we have funds to pay for our children to go to college etc. I don't have any dream for a big house or a fancy car. I don't even really want to pay off the mortgage as there is a risk we may move for my husband's job, in which case we might have to rent out the house we currently live in so it would be better tax wise to keep the mortgage, I think?

But I don't want to keep all the shares in one company as that seems very risky. And llike everyone else in Ireland, I wouldn't be rushing into property investment. What is the safest bet?


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## Joe_90 (14 Apr 2014)

Is it a private company or a public Company?

In some cases the company will have insurance in case a director/shareholder dies and may be in a position to buy back the share this would mean that you could get cash of your investment and diversify your portfolio.

Talk to the directors and see if they have any plans to buy back your shares.  Might be something they would be interested in.


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## horseshoe (14 Apr 2014)

Its a public listed company, Joe90, it's probably irrelevant which one?


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## Bronte (15 Apr 2014)

*Home becoming investment*

Yes it is better to have a mortgage in that scenario, but you'd have to supply figures to see if it could make financial sense in the future

*One type of share*

Not a good idea, and would think you've too much invested in shares in any case, but I'm no expert on this.


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## RainyDay (15 Apr 2014)

horseshoe said:


> But I don't want to keep all the shares in one company as that seems very risky.



It is very, very risky. Diversify urgently, even to cash/bonds, or to shares in other industries and geographic regions, or to an investment fund which will do the diversification for you.


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## Brendan Burgess (15 Apr 2014)

1) Agree with RainyDay's urgency. Reduce your holding in this company to a maximum of €100,000 immediately. Put the money on deposit while thinking about what to do with it. 

2) Pay off your car loan assuming no early repayment penalties. 

*3) Should you repay your mortgage? 
*Let's assume it's an investment property
You get tax relief on 75% of the interest 

Interest 4.5%
Tax relief on 3.375
Tax relief @50%: 1.7%
Net cost: 2.8% 

You will not be able to get a risk-free net return of 2.8% on your money, so pay off your mortgage. 

4) Probably max your pension contributions.  But take advice on this.  If you have no fund, then you can build up to around €800k tax efficiently, so you should do so.

5) *Consider trading up

*Does your house meet your needs?  Trading up is a great investment. You get a tax-free return in that you are not taxed on the enjoyment of the house.  Nor are you taxed on any capital gains you make if you sell the house. 

It wouldn't be a good idea to do this now if there is a significant risk that you might have to relocate.  But if you do relocate, buy a house you want to live in. 

6) What to do with the balance? 
The best long term returns will probably come from a portfolio of around 10 shares held directly.   They will fall in value, but you can comfortably handle the fall and wait for them to rise again. 

Shares are very liquid, so you can cash them as you need more money to  fund your pension, or pay for the kids' education. 

7) If you do move, you probably shouldn't bother keeping your present home 
If you move, buy a home in the new location.  You are wealth enough in terms of income and assets that you don't need to mess around with property investment and the hassle of tenants. If you do move back to your current location, then buy in that location.


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## ashambles (15 Apr 2014)

Selling around 1m of shares which is almost all the poster's wealth needs to be taken with some care. Rushing out and selling them as quickly as being advised may have its own problems.

What if the shares are held in a smaller Irish company that is thinly traded, in such a case a quick sale may not even be possible. 

Even if the share is with a more normal company and 1m worth of shares won't cause any market reaction on a personal basis I'd sell them off over several months. At least then you get the average price over several months. 

Also as it happens the last week has been dismal for a lot of shares - maybe it'll get worse - who knows, but still it might worth at least checking how far off highs the stock is trading so the seller is at least aware of that rather now rather than after they're sold.


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## Brendan Burgess (16 Apr 2014)

Hi ashambles

That is a fair point if the shares are in a thinly traded company. But I assumed, in the absence of any information, that it is in a large quoted company.  

Assuming they are in a large quoted company, then the original advice is correct. Sell them tomorrow. Don't delay.   I am a great advocate of holding shares for the long-term, but in the short-term they are very volatile.  Sell 90% of your holding now, or as soon as possible if they are in a small company.  Buy other shares to diversify your holding. 



> At least then you get the average price over several months.



This doesn't make any sense to me at all.  A lot of people talk about "pound cost averaging" but it's nonsense dressed up to sound like clever financial engineering.


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