Will I face tax bill for signing over house?
Q I WAS in a relationship for 11 years. In 2010, my partner built a house for us to live in. The property is in joint names but my partner paid the mortgage as I am a carer and have no earnings. He moved into the house in 2011 to live in it — but I never did. He was living in the family home before that and I was in my home. The new house (which he built) is on his land. We split up in 2012. I am in the process of returning — or signing over— the property to him as some advised I don’t have much claim to the property having never paid the mortgage on it and never having lived in it. What I’d like to know is if I will owe the Revenue any money when I sign the property over to him? I haven’t gained anything from the property. It’s his second property and my house belongs to the local council. Anne, Galway
THIS is a really tricky situation personally — and from a tax and legal perspective. Whilst you haven’t actually benefited or gained anything from your ownership, you still own 50pc of it.
I don’t know what the value of the house is, but let’s say it’s worth €250,000. Your 50pc is worth €125,000. You have in essence a capital gain of €125,000 as you didn’t put in any money for the building of the house or the purchase of the land. If you dispose of your share now, you are actually gifting a value of €125,000 to your former partner and you could be liable to capital gains tax at 33pc on that value.
In addition, your former partner could potentially have a Capital Acquisition Tax (CAT) liability as he would be receiving a gift of €125,000 from you. As the current CAT threshold of €16,250 applies in this case, your former partner can only be gifted €16,250 from you tax-free, meaning tax would be payable by him on much of the €125,000. You also could be liable to gift tax on the value at the time that 50pc of the house was transferred to you originally.
As you can see, this situation is a minefield and whilst there are tax exemptions for co-habiting couples, this might not apply in your case. My advice is to get the best legal and taxation advice before proceeding with any transaction.
Can survivor access account?
Q WHERE a deposit or investment account is in the name of both spouses, in the event of the death of one partner, can the surviving spouse have access to the monies in the account without a requirement for grant of probate? Is there a limit over which probate is necessary? And what is the situation regarding An Post investment or bond accounts in joint names? Teresa, Rathmines, Dublin 6 WITH a deposit account, on the death of a joint account holder, the surviving spouse can have access to the monies in the account once the financial institution has sighted the death certificate.
The financial institution may request some additional paperwork to amend the ownership, but access to the money should not be an issue. There is normally no need for probate.
There is no monetary limit above which probate has to be extracted. However, banks and credit unions may have their own limits below which they will allow the release of funds to beneficiaries — these vary between €10,000 and €25,000, depending on the financial institution involved.
An Post investment or bond accounts held jointly by spouses should be treated on the same basis as joint bank accounts.
Dilemma over shared home
Q MY daughter and I have a second house in joint ownership. My daughter, who has a disability and has been unable to work, has been living there for the past four years. As I am in my late 70s, should I need nursing home care, I may need to use the house as one of the assets to pay for my care. Should this happen, what will happen to the house after my death — will it have to be sold to fund payment of nursing home fees? Molly, Skerries, Co Dublin I WOULD suggest that you be very careful before giving your share of that house as security to anyone for anything. I presume that on your death, your share in the house will pass to your daughter with whom you own the house. If you give your share now as security, and that security is called in and the house has to be sold, then where will that leave your daughter?
Have you thought of gifting your share to her now so that any future growth of your 50pc share will be in your daughter’s name, rather than yours? My view is that as this is really your daughter’s house, you should transfer the ownership fully to her now.
I’m not sure what your plans are for your own residence and what plans you have for the second house when you go. Naturally, if you use that second house as security for future funding of nursing home care, such as under The Fair Deal Nursing Home Plan, then the house may very well have to be sold on your death as a result.
Spiralling life premiums
Q I started a life policy in 1992. I have been retired for the past 10 years and while my pension appears to decrease every year, my life insurance premiums have increased to €989 per quarter. Is there any alternative to paying this premium as my insurer will not freeze the premium permanently. Eddie, Drimnagh, Dublin 12
I AM glad you asked this question, as this particular type of policy has been the bugbear of the life insurance industry in Ireland for quite a few years. In hindsight, the idea of a life insurance policy that increased in cost as we get older was probably not a very clever idea.
The reason why they were set up in the first place was to give people the option of arranging permanent whole-of-life cover at a much cheaper initial cost than would normally be the case.
The premium was initially calculated assuming a particular policy term, sum insured and investment return.
It was usually guaranteed for 10 years and then subject to review by the insurer. On the 10th policy anniversary, and each subsequent review, a premium increase can be requested once the insurer has considered factors such as the insured’s age, life cover, and fund value attaching.
Unfortunately, a significant premium increase was often required, with the insured having no certainty on future premium levels.
The good news is that finally one of the life insurance companies, Irish Life, has just come up with a possible solution to try to sort out this festering mess. For policies similar to yours, Irish Life is piloting a “new guaranteed whole-of-life cover plan up to €30,000” as an alternative.
The aim of this pilot is to help create more certainty for clients with reviewable protection plans. Under the pilot, clients aged 65 and over can move up to €30,000 of their life cover (or their maximum cover if less) to the new plan. This cover will be guaranteed for the rest of their lives. If two people are covered, then both must be over 65.
I don’t know how much cover you have, but you should check this out with Irish Life to see if this new plan would be suitable for you. The revised premium would be fixed for the rest of your life.
Email your questions to lmcbride@independent.ie or write to ‘Your Questions, Sunday Independent Business, 27-32 Talbot Street, Dublin 1’. While we will endeavour to place your questions with the most appropriate expert for your query, this column is not intended to replace professional advice.