# No mortgage, expecting a big inheritance and €160k in a college fund



## ThisisMax (13 Jun 2022)

Age: 49
Spouse’s/Partner's age: 50

Number and age of children: 2 (12) & (15)


*Income and expenditure*
Annual gross income from employment or profession: €45K
Annual gross income of spouse: €40k

Monthly take-home pay - Self-employed/ project based so changes – roughly €3k month.

Type of employment: e.g. Civil Servant, self-employed - Both Self Employed

In general are you:
(a) spending more than you earn, or
(b) saving?
Neither. Just spending as required. No saving, no extra cash.


*Summary of Assets and Liabilities*
Family home worth €500K with no mortgage
€90K in Irish Life Fund, €70K in Davy Fund both for kids’ education.
Pension fund: €60K for me and €250K for my wife.
Company shares: None
Buy to Let Property – None. But we do utilise rent a room in our home with a college student to the max of €12k per year tax free.

*Family home mortgage information – *Paid off earlier this year.
Lender N/A
Interest rate N/A
If fixed, what is the term remaining of the fixed rate? N/A

*Other borrowings – car loans/personal loans etc*

Do you pay off your full credit card balance each month? No credit card.
If not, what is the balance on your credit card? None.
Car Loan - €350 per month. Two more years.

*Buy to let properties*
Value: None
Rental income per year: None – see Rent a Room income above for €12k per year tax free.
Rough annual expenses other than mortgage interest : N/A
Lender N/A
Interest rate N/A
If fixed, what is the term remaining of the fixed rate? N/A

*Other savings and investments:*

Do you have a pension scheme? Just two small schemes as both self-employed. €60K for me and €250K for my wife.
Cash of €90K in Irish Life Fund
€70K in Davy Fund for kids’ education.
It is anticipated both funds are towards kids’ education.

Do you own any investment or other property? No but rent a room can continue indefinitely as it’s a high demand rental area.

*Other information which might be relevant*
Life insurance: Covered via policy with Irish Life.


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



We are both self-employed. My wife works 4 days a week and I work 3 – 4 days a week. I have suffered from chronic pain for several years and due to medication side effects etc I am limited in what I can do hence modest income. We both have a similar philosophy to money – life comes first and no borrowings is good and we have a low key life. We don’t really spend very much as we don’t earn very much – but quality of life is good and now mortgage free.

My wife will inherit a lot of money when parents in law pass in time – cash of over a million and rental properties etc. There is succession planning in place for this and we have met financial planner from their end etc. My parents in law have also saved for kids and will contribute towards college if required. We know this is coming but that’s hopefully way down the line and we are happy ticking along now. We see this as our pension – rentals etc. There are 3 rentals in total plus assets and cash.

We are both happy to tick along. I have no real career aspiration other than to do what I do, I could earn more but the impact on my chronic pain is not great.

Sometimes think we should be really working to make more money, but I see our friends around us with pressured quality of life commuting etc and wonder why?

Should we try to put more into pensions? My feeling is that rent a room is ticking along and pays its way, and we are both earning enough to have a nice quality of life. More cash would be nice but I guess living with chronic pain has made me realise money is not everything.

I welcome any thoughts on the above.

Thank you


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## Peanuts20 (14 Jun 2022)

Your in a decent place with the right attitude in many respects to money. Some thoughts

make sure you have a will and guardianship for the kids in place, just in case
make sure your tax affairs are as up to date as you can with everything you can claim for, being claimed for
re the inheiritance, I would suggest getting you own tax advice. One thing to be aware of is that the Fair Deal scheme or privately paid nursing home care will eat into this quite quickly.  It is worth taking advice now on the impact of transferring some assets over at this stage rather then simply waiting for the in laws to pass away.


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## Rasputin (14 Jun 2022)

Well done on being mortgage free at 50. Being mortgage free is a massive help towards retirement or a more relaxed work life balance.  Having a million in cash plus three properties and assets coming your way at some point will put you in a place financially where most people will never get too.  I think your in a good place, and I'm not sure I'd be stressing about making more cash or scrimping for pension contributions if I was in your boat.


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## ThisisMax (14 Jun 2022)

Thanks both for your feedback. I guess I feel a little bit of under achievement careeer wise mostly due to chronic pain and don't want to sound ungrateful as we are in a good place - not much left over at the end of the month and no fancy holidays but its OK. I do see friends on huge money which is a bit eye opening and hope that long term inheritance etc will work out. A bit to go.

@Peanuts20 Thats a good few things to thnk about. I must go talk to someone about guardianship and my wife still has to sort her will. Good advice.
Tax position is good - have a good accountant who keeps my income in check with revenue etc.
For my in laws & inheritance - we have had a long process of looking at tax efficient transfer of wealth etc. Their care is accounted for also outside of that inheritance - they are very clued in and self sufficient - generous also and I appreciate their generosity. I think we have a clear picture of value of assets etc and they seem to have a good person advising - we had a few round table discussions on that. All good points you raised tho.

@Rasputin Thanks - I try to focus on quality of life stuff for me so I can stay working - that sometimes means taking a break when I dont want to. My kids are happy and great and thats super important to me as they have lots of things I did not have when I was small - I came from a poor enough family with few opportunities. I have made as good decisions as I could for us both - finding out about rent a room, setting up pensions and starting the inheritance process, also finding a tracker at the time - so I have been lucky and hopefully that will give us security.

This is a great site to browse and see what others think. Thanks again.


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## Pinoy adventure (14 Jun 2022)

Maybe try too build up a little rainy day fund in case of emergencies.


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## noproblem (14 Jun 2022)

ThisisMax said:


> Thanks both for your feedback. I guess I feel a little bit of under achievement careeer wise mostly due to chronic pain and don't want to sound ungrateful as we are in a good place - not much left over at the end of the month and no fancy holidays but its OK. I do see friends on huge money which is a bit eye opening and hope that long term inheritance etc will work out. A bit to go.
> 
> @Peanuts20 Thats a good few things to thnk about. I must go talk to someone about guardianship and my wife still has to sort her will. Good advice.
> Tax position is good - have a good accountant who keeps my income in check with revenue etc.
> ...


You must have been on very good money to pay off a big mortgage early. Sorry to hear about you being not well healthwise but wondering what you would like to have the extra cash for. Is it holidays, going away for weekends, bigger car, clothes, extension, etc? Sometimes if we make a list and pick the ones that really matter, we'll find that there's very little we want at all. Find out what makes the kids tick, what it is they think is missing a little bit. Sometimes that will work wonders for adults too.


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## Brendan Burgess (15 Jun 2022)

ThisisMax said:


> €90K in Irish Life Fund, €70K in Davy Fund both for kids’ education.
> Pension fund: €60K for me and €250K for my wife.





ThisisMax said:


> Car Loan - €350 per month. Two more years.



First of all, why are you borrowing money at interest to put in a fund on which you are paying taxes and charges?  Because that is what you are doing.   Unless you have an interest-free PCP, pay off the car loan immediately.

The best form of long-term saving is via a pension fund. Your pension fund is very low. You need to start maxing your pension contributions now so that they use up at least your 40% tax band.  Others would suggest that you should contribute more to use up your 20% tax band, but I am not so sure given that with your big inheritance, you are going to be on the top tax-band when you retire. 

Brendan


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## Brendan Burgess (15 Jun 2022)

ThisisMax said:


> Cash of €90K in Irish Life Fund
> €70K in Davy Fund for kids’ education.





Pinoy adventure said:


> Maybe try too build up a little rainy day fund in case of emergencies.



With respect Pinoy, €160k is a big enough rainy day fund for anyone. 

If an emergency hits, then they can access these funds.


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## Brendan Burgess (15 Jun 2022)

ThisisMax said:


> Cash of €90K in Irish Life Fund
> €70K in Davy Fund for kids’ education.



This is the big mistake most people make. 
They put their finances into separate jam jars.   
So they have a car loan.  They might have an emergency fund. They have a pension. They have a kids' education fund.

You need to start thinking of your whole finances as one overall big jam jar. 

Don't have cash on deposit while you have a mortgage or other loan. So pay off the car loan. 

You don't need €160k in an education fund. Start feeding it to maximise both your pensions. 

The €160k should be a long-term fund invested in equities.  I don't like the sound of "cash of €90k". That probably means you are getting a 0% return less whatever Irish Life charges you for holding on to it.


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## Brendan Burgess (15 Jun 2022)

ThisisMax said:


> we do utilise rent a room in our home with a college student to the max of €12k per year tax free.



You do not need to do this for financial reasons. You have plenty of money and plenty of back-up from your in-laws if you need it. 

If you enjoy having a college student in the house, then fair enough.  But if they are in the way or if they are any hassle, then get rid of them. 

Brendan


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## Steven Barrett (15 Jun 2022)

Brendan Burgess said:


> This is the big mistake most people make.
> They put their finances into separate jam jars.
> So they have a car loan.  They might have an emergency fund. They have a pension. They have a kids' education fund.
> 
> ...


This is true. But I would put it as a smaller error than a big financial mistake. People can find it easier to plan their finances if their compartmetantalise their savings. If it works for them, it's not the end of the world.


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## Steven Barrett (15 Jun 2022)

@ThisisMax 

Does this future inheritance have an undue influence on your financial thinking? I know that you suffer from chronic pain, which probably has a bigger influence, but has this future money allowed you to concentrate on paying down the mortgage and not save for retirement? Has it taken the pressure off working longer hours to allow you some pain relief? Remember, those others who you see working long hours probably don't have the same situation. 

My question now is, what if your in laws live to be 100? You have chronic pain and therefore you have an increased chance of having to retire early on medical grounds. What are you going to do if you have to retire and you haven't received the inheritance? Or it does not look like you will receive it for another decade? You need to make your own plans. You have paid off your mortgage. This money should be redirected into your pension so you can start building up your own funds, so you can have your own sources of income and can retire when you want to retire. 


Steven
www.bluewaterfp.ie


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## Brendan Burgess (15 Jun 2022)

I wonder if it's worth discussing getting some of the inheritance now? 

The downside is that if your in-laws die while holding property, the capital gains disappear.
If they give you something now, then they would have to pay CGT on any gain. 

Also, if you and your wife split up, you end up with a share in an asset which you wouldn't otherwise have got.

Brendan


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## ThisisMax (16 Jun 2022)

noproblem said:


> You must have been on very good money to pay off a big mortgage early. Sorry to hear about you being not well healthwise but wondering what you would like to have the extra cash for. Is it holidays, going away for weekends, bigger car, clothes, extension, etc? Sometimes if we make a list and pick the ones that really matter, we'll find that there's very little we want at all. Find out what makes the kids tick, what it is they think is missing a little bit. Sometimes that will work wonders for adults too.


Hi @noproblem Thanks. We were lucky and got a tracker and just worked hard to get it paid off, the last bit was done by some of the inheritance extra cash. Some more holidays would be good, dont need anything else thankfully, I guess I value the small stuff! Appreciate your comments.


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## ThisisMax (16 Jun 2022)

Brendan Burgess said:


> First of all, why are you borrowing money at interest to put in a fund on which you are paying taxes and charges?  Because that is what you are doing.   Unless you have an interest-free PCP, pay off the car loan immediately.
> 
> The best form of long-term saving is via a pension fund. Your pension fund is very low. You need to start maxing your pension contributions now so that they use up at least your 40% tax band.  Others would suggest that you should contribute more to use up your 20% tax band, but I am not so sure given that with your big inheritance, you are going to be on the top tax-band when you retire.
> 
> Brendan


Hi @Brendan Burgess Thanks for all your insights - really good. I will answer each post so my rationale (or lack of) is clear.
Car Loan - yes I am paying interest. I just did not want to dip into the 'kids education' fund so to speak. My salary is lowish and will be lower this year as I will be working less than last year so I want to use it to pay off the car/ household stuff and avoid going after the other fund.
On the pension - as I am 49 I think I can do 25% of my income up to €115K per year and get tax relief on this. The issue is that my income is so low (lower this year) that 25% of it is a small amount and I don't have it to spare - maybe I shoud just put all my available income after spending into pension. Can I use a lump sum from inheritance and put it in to boost the fund ( maybe not gain the tax relief but the fund would be going up)? 
Also I was thinking long term that our inheritance/ properties that we could rent will be our income once retired?


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## ThisisMax (16 Jun 2022)

Brendan Burgess said:


> This is the big mistake most people make.
> They put their finances into separate jam jars.
> So they have a car loan.  They might have an emergency fund. They have a pension. They have a kids' education fund.
> 
> ...


Thanks Brendan. Yes thats a good way to look at it. 
Car loan maybe should go and I replace into the fund and save the interest?

Education fund I dont want to dip into primarily because I have no guaranteed income being self employed and sometimes in chronic pain. So the lack of stress about education fund is a good thing. 
Maybe we should look at investing the fund - my son is going into 4th year so three more years in school, my daughter going into 1st year so six years for her. Is that too short a time to invest? Risk?


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## ThisisMax (16 Jun 2022)

Brendan Burgess said:


> You do not need to do this for financial reasons. You have plenty of money and plenty of back-up from your in-laws if you need it.
> 
> If you enjoy having a college student in the house, then fair enough.  But if they are in the way or if they are any hassle, then get rid of them.
> 
> Brendan


Fair point. They are there and grand - sometimes away a good bit. Its a big house and its 12K per year tax free so its a cushion in case I cannot work plus it does pay a lot of our outgoings enabling me to do less full time work so I can do kid pick ups, school etc.


Steven Barrett said:


> @ThisisMax
> 
> Does this future inheritance have an undue influence on your financial thinking? I know that you suffer from chronic pain, which probably has a bigger influence, but has this future money allowed you to concentrate on paying down the mortgage and not save for retirement? Has it taken the pressure off working longer hours to allow you some pain relief? Remember, those others who you see working long hours probably don't have the same situation.
> 
> ...


Hi @Steven Barrett - in answer - Not too much influence I think. I know its coming and it will leave us secure enough even after tax. I really just want my kids to have a good start in life. THe inheritance first part that is tax free has been exhausted by giving us funds to pay the last bit of the mortgage and a property transfer. Everything we get from here on in is taxable I believe. Some of the pressure off working long hours is managed a little - I still work as much as I can and take nearly every freelance job I can as I dont know if I will be out of action for a few days at a time. A significant part of my money pays our housefhold  expenses and that withj rent a room keeps house OK. We are lucky to be avle to use the mortgage to be cleared by inheritance that we got. For my in laws - they are capable of living to 100! I think I will be fine if we dont get inheritance. We have two kids to put through college with funds in place, moretgage is gone, a non extravagant lifestyle, 12K rent a room for as long as it lasts and our 'fixed' costs for house etc are low. I don't have any desire to do much really - maybe a bit of travel, I'm happy gardening of hiking. Don't drink, dont smoke etc. Pension I asked a Q of Brendan upthread so maybe thats my big focus from here on in. I also hope that the inheritance will trickle through in bits and pieces.


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## ThisisMax (16 Jun 2022)

Brendan Burgess said:


> I wonder if it's worth discussing getting some of the inheritance now?
> 
> The downside is that if your in-laws die while holding property, the capital gains disappear.
> If they give you something now, then they would have to pay CGT on any gain.
> ...


We got up to the threshold recently to clear remainder of mortgage. The rest is all taxable I think but we know that to access it we will have to pay tax on it as we have exhausted all tax breaks. There are three properties and other assets. All normal houses so nothing flash but collectively its a nice portfolio. I'm glad I dont have big debt and have learned to live frugally.


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