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Money Times - July 1, 2014

Posted by Jill Kerby on July 01 2014 @ 09:00

 

 

YOUR QUESTIONS – FROM DIRT TO DEPOSITS, TRACKER MORTGAGES TO WRITING A WILL

 


BC writes: I have become a bit confused in regard to DIRT/deposits. You recently mentioned a 41%-45% rate. Which is it? Apart from those exempt from DIRT because of low income, are other over-65s exempt at this new rate? And while heretofore DIRT having been deducted, one had no further obligations tax-wise, has this situation changed?

 

The higher DIRT rate of 45% applies to returns held by deposit holders who have total “unearned” annual income of more than €3,174, say from rental income, or share dividends or life assurance based income.  In that case, and so long as you are not a pensioner, you will pay 4% PRSI on top of the 41% DIRT tax on your deposit interest and the other “unearned” income.

As for the DIRT itself, it is not a charge if you are over age 65 and your total annual income as an individual does not exceed €18,000 or €36,000 for a couple. You must ask your bank to apply to the Revenue to ensure, in that case, that your deposit interest is paid tax-free.

 

DEPOSIT GUARANTEE

 

MC writes: My mother is almost 83 and is worried about keeping her savings in the bank. She has over €200,000 in this account and after reading that you wouldn’t advise keeping over €100,000 in any bank account she would like some options.

In the event that any Irish bank needs financial assistance again – and new stress tests of EU banks are now underway – the European finance ministers have made it clear that depositors, along with shareholders and bond holders, will have to participate in the “bail-in”. This means that a portion of money in deposit accounts in excess of the €100,000 guarantee scheme limit will be confiscated, just like they were in Cyprus in March 2013.  Your mother needs to take the amount over €100,000 that she has in the single bank and put in another bank (or two to ensure interest payments don’t tip the total over €100,000.) If her total annual income is less €18,000 any interest payments will be DIRT free. If not, she should consider An Post state savings products which are not subject to DIRT.  Returns are very poor at the moment and she is unlikely to get net interest of much more than 2%-2.25% gross from any bank account, although Nationwide UK Ireland is offering a 4% gross variable return on a 15 month regular savings account in which up to €1,000 a month can be deposited.

 

OVERPAYING A TRACKER

VB writes: My tracker mortgage has 10 years to run and the balance is almost €130,000. I have €90,000 locked away in a long term deposit account with Permanent TSB. I have more than €15,000 available to me and I’m not sure if I should put a lump sum off the mortgage or do as you said on radio recently and start making overpayments. I have been advised that paying off the mortgage in full would not have been a good idea as my interest rate is 0.85% percent.

If you can confidently meet your current monthly repayments, that is, if your job/income are secure and you don't have other expensive debts then there is no urgency in clearing your loan, certainly not with all your savings.

As Karl Deeter and I explained on our new Money Talking slot on RTE Drivetime, (Mondays, 6:15pm) by overpaying your loan by even €100 a month you can knock months (or even years) off the repayment term and saving thousands of euro in future interest.  Pay off a mortgage early and those repayments are now all yours with which to spend, save or invest again.

A tracker loan is a real boon - you won't see that rate again. Some of the banks will let you move your low, 0.85% tracker to a new property, but only for five years after which you revert to the much higher variable rate, currently 4.5%. If you are planning to move in the near future, you may not want to dispose of your tracker mortgage too soon.

 

DISTRIBUTING AN ESTATE

 

BG writes: I live in the UK but recently visited an aunt in Co. Sligo who is very elderly, still living alone on her little farm. She hasn’t made a will but I am advised that she should. I assume that like English law, if no Will is made before a person becomes deceased, their assets/property goes to the State?

 

If your aunt does not write a will, that is, she dies intestate, her estate will be distributed according to the 1965 Succession Act.  Siblings inherit first or their children if the sibling is deceased. If there are no siblings still alive then nieces and nephews inherit in equal shares. The tax-free inheritance for siblings/nieces and nephews is currently just €30,150. The balance is taxed at 33%.

 

 

 

 

 

If you have a personal finance question you would like answered, please write to Jill at jill@jillkerby.ie

 

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