Money Times - May 4, 2015

Posted by Jill Kerby on May 04 2015 @ 09:00


The MoneyTimes postbag is filling up again…Q&As:



Ms CK writes: I have recently been diagnosed and treated for breast cancer and my prognosis is good. I have a Living Cover policy with

Bank of Ireland Lifetime that will pay out a five figure lump sum. We have no mortgage except on an investment property and is covered by the rent. I am receiving sick leave from work. We do have three children, one in college. Can you make any investment suggestions?


Serious illness policies which pays a tax-free lump sum for a diagnosis like cancer, are a great relief for the patient as it means that you won’t have to worry so much about the inevitable extra costs of being ill and out of work. I think they are particularly good for stay at home parents who will not have income protection insurance, often provided by employers.


Your personal finances appear to be quite good, but don’t be too quick to commit your lump sum to either the children’s’ college costs or any other longer term asset; you probably still have a year’s worth of difficult, exhausting treatment and recuperation ahead. The purpose of this insurance was to help pay additional medical bills, keep your home running efficiently (say by hiring a housekeeper) or perhaps even to pay for a brief sun holiday between treatments.  You can spend some of it on special treats on the - inevitably worried - children in return for their extra love and kindness.


If there’s much money left over when your treatment is finished, that’s when to look into investment options. Bank of Ireland has just launched a very informative website (www.bankofirelandlifeonline.ie) that will take your through all their savings and investment options, but you might want to get some independent, impartial advice as well.  (See below). 



Ms MC writes: You mention that regarding financial matters that you should get independent advice.  How do you go about getting independent financial advice?


Financial advice never comes free. The vast majority of us use commission-remunerated financial salesmen – brokers – who are paid sizeable commission from every investment contribution or payment . The commission – and other compulsory charges - can create a serious drag on any growth. Even if your fund/investment loses money, charges and commissions will be paid.


I always recommend independent, impartial, fee-based advice that avoids the payment of on-going commissions. Only a minority of Irish brokers/advisers work exclusively for fees. Some will offer both options but prefer to take commission.  The Society of Financial Planners of Ireland, part of an international financial training and accreditation organisation, encourages fee remuneration. It has just launched a register of members and an on-line map locater. (Some SFPI members work for financial institutions like banks, life assurers, stock brokers and are not impartial.) You can find the map here: www.sfpi.ie



Mr JM writes: I understand that the inheritance tax threshold between a parents and a daughter is €225,000 and there is an inheritance tax exemption for a dwelling house provided in a will of three years residence before inheritance and six years after. But do they apply together or separately?


The information you have is correct and yes the combined inheritance applies: your daughter can inherit the family home, tax-free, if she has resided in it with you for at least three years before getting the inheritance and she can still qualify for the tax-free inheritance value threshold of €225,000 between a parent and child. The only condition for inheriting the family home tax-free is that she must not have been the part or full-owner of any other property.



Ms EH writes: I am a PAYE worker, under age 66, and I earn more than €3,174 from “unearned income”. Will I have to pay the 4% PRSI levy on the gross or net amount of interest I earn from my bank deposit income?  Is the 4% calculated on the amount before or after expenses on my buy-to-let rental property? Finally, is the return from my Post Office savings exempt from the PRSI levy?


Yes you have to pay the 4% PRSI on the gross interest on the interest you’re your bank deposits. Next, you only pay the 4% levy on what remains of your rental income after all the qualifying expenses are deducted and any return from State Savings (not An Post deposits) are PRSI-free, but if you have National Solidarity Bonds only the income, and not the bonus is exempt from the 4% levy.

Mr DA writes:
I have €50k that I want to invest. I am thinking of going to the Post Office for a five year fixed term account. What will this 50k be worth in five years? Are there different options I can go for? What about DIRT?


The current issue of the State Savings Bond will pay you a net return of 7% after five years and six months or an AER of 1.24% tax-free. Your €50,000 will be worth €53,500. However, price inflation will probably eat away at that return leaving you with much lower spending power in five and a half years than you have today.  You might want to get some independent, impartial investment and tax advice if you want to produce a genuine return from your lump sum.


If you have a personal finance question for Jill, please email her at jill@jillkerby.ie or write to her c/o this paper.



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