Jill Kerby

<!--StartFragment-->Inherited house has the potential to split the family

AG writes from Co Galway:  We are in the middle of a family dispute over a will. Three of us have inherited a property from an elderly uncle who died in October.  My husband and I believe it should be sold at whatever the market value is in order to get whatever money it produces. My two brothers want to hold onto it for when “the market recovers”.  It is a 1950s bungalow on just over a quarter of an acre but the location is not great – on a relatively busy road on the way out of the town – and it is not in great condition. Between it having to be repainted and redecorated at the very least, and the inevitable repairs and then property taxes being introduced, I think we should just sell it. I’d appreciate your view about where the property market is going and also, will the lower inheritance tax-free amount that was announced in the budget apply to us, or the 2010 thresholds? 

Given how far property prices have already fallen – perhaps as much as 50% - from their peak in 2007, I think it will be some time before you and your brothers see anything like those levels again.  If and when the bottom is reached, prices will probably bump along that bottom for a few years and then only start to rise in line with inflation.  That is the usual pattern after a property bubble bursts. You are right to be concerned about upkeep and taxes but if you are unwilling to wait for the market to recover and don’t want to keep shelling out money on this unoccupied property, you and your brothers should at least consider renting it out to meet the ongoing costs.  If that doesn’t happen, you could always insist that they buy out your one-third share at the current market price. If they don’t cooperate, you may have to seek the assistance of your solicitor in persuading them, with all the negative family consequences such action might generate.  
 
Meanwhile, the Revenue will be looking for their share of your inheritance, whether it is sold or kept until the market turns. Any inheritance or gift received (on the date of death) in the previous 12 months to the end of August must be included in a pay and file Capital Acquisition Tax return by 31 October. You and your brothers have until 31 October 2011 to fill out your Form IT38 to the Revenue and pay the appropriate tax.  The 2010 CAT tax-free threshold for Group B (which includes uncles, nieces and nephews) of €41,481 will apply in your case.  Any amount over that sum is subject to tax of 25%.  If, for example, the property has a market value of say, €200,000, the taxable balance of €75,557, divided by three means that you will each have to pay 25% tax on €25,185 or €6,296.  Check with your solicitor or tax advisor about what expenses and costs can be deducted from this CAT bill.

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Devaluation derby 

CMcC writes from Cork: I read with interest your column in the Sunday Times in the past two weeks regarding the handling of debts / mortgages in the event of a return by Ireland to the punt or devalued euro and my question addresses the other side of the story i.e. savings. If I had €1,000 in a savings account with an Irish bank or post office and Ireland was to return to the punt valued at say 0.90 pence would my savings then be worth: a) 1,000 euro, b) 900 euro or c) 1,000 punts? Alternatively if my €1,000 euro were with a bank in Germany / France or Holland what would be the outcome? Or finally if my €1,000 were with a "foreign" bank here in Ireland e.g. Investec / RaboDirect / Ing what would happen? I realise that it is always difficult to say with certainty what will happen in these kind of hypothetical situations but I would be very interested to hear your opinion on the above points.

This question of what happens to our euro if Ireland leaves the eurozone has become a national obsession – and quite right too since there is great uncertainty about what will happen to the highly indebted countries of the eurozone.  In the case of savings, there is a view that if we were to revert to the punt, the punt would be worth less than the euro.  No one knows what level of devaluation would apply, but if, as you suggest your €1,000 was converted to punts at par, with the punt then devalued by 10%, your new punt savings would then be worth £900. The real question is not so much what the devaluation of the new currency would be against the euro, but what the break value from the euro would be.  When we joined the euro back in 2002, every punt was valued as 1.27 euro.  If we were to break from the euro, would the reverse be the case – that is, would every €1 euro revert to being a new Irish punt that would have a value to the euro of 0.79 cent?
 
Finally, no one, even in the foreign banks that operate here, has been able to come up with the definitive answer about what would happen to euro held in non-Irish banks (that are also outside the remit of the Central Bank of Ireland), or even the ones, like NIB and Nationwide UK, whose parents are based in non-eurozone countries. Would your euro remain euro, or would they be automatically converted to the new Irish currency, which may or may not be devalued?  The only way you can mitigate against any such scenarios is not to leave all your savings in euro, or in Irish-owned banks, or entirely in Ireland or entirely in the eurozone. If you are worried, speak to a good, fee-based advisor about all your options. 

Readers who would like Jill to organise a personal finance seminar for their group or organisation this year, can contact her at jill@jillkerby.ie for more information about topics, venues and cost.  Sandra Gannon, the TAB Guide co-author and tax expert is also available during the seminars to answer individual tax questions.