Dear Money Mentor,
I have read your articles on inheritance and the need to make a succession plan. You always seem to centre on where there is children. We don’t have any. We own 30 acres and have decided to split it between two cousins on my side and two of my husband’s sisters. What can we do to ensure that we do not leave it so that they are fighting over it? We don’t want it to be said they made a right mess of that when we are gone. We have made a will but worry that it is not clear. Is there any way that we can set it up to avoid them having to pay it all out in inheritance tax.
Mary
When I rang Mary to have a chat about their plans, it was very obvious that they wanted to be seen to be fair. They were younger than I expected – in their mid-40s – but obviously had thought about the situation.
“We just don’t want to make a mess of it when we are gone,” she told me again. It is 30 acres but there is also a house and stock, so it adds up to over €500,000.
The first positive is that they had made a will. Mary set out the current situation: “As it stands, if one of us dies, it will pass to the other. It we both die, it will be shared out.”
This seems quite clear, but it’s not just what is said but the way it is worded I told her. You want to word it in a way in which there is no reason for doubt. In some ways, it is better to stipulate that your wishes are for it to be sold and the money divided out between the different people you have named.
“What if I wanted to put in a clause that if one of them wanted to buy the others share out they could?” Mary asked.
You have to make sure that the clause states that all the others have to agree to sell to the one who wants to buy and even give a specific timeline in which that must be agreed. The last thing you want is one or two in disagreement and being able to block the sale of the land, leaving it in limbo.
It is also important to review your will every few years, particularly if there has been a significant change in you fortunes. It could also be that someone you wanted to pass a share on to has died before you and you want to change the people who get it.
The other thing I suggested to Mary was to put in place a power or attorney. Not having one is the other issue that can leave things in a mess. I have seen cases where the land is left in limbo if the owner has lost the ability to make their own decisions due to illness. The only way decisions can be made is if the person is put into the care of the State, who then make the decisions. By putting a power of attorney in place, you can put one or more people in charge of your affairs to make decisions.
Tax
On the tax side of things, it really comes down to what capital acquisition tax band the relatives fall into. You husband’s sisters would fall into tax band b and be eligible for €30,150. So, if they got €125,000 each from the will, then around €95,000 would be exposed to the capital gains tax (CGT) of 33%. This would be a bill of around €30,000. What might increase this is if the relatives have already got gifts or inheritance under these bands in the past. Since it is cumulative, they could be exposed to CGT at 33%, increasing the amount that they would have to pay.
Your own cousins would fall into band C, which at €15,075 is even lower. They will be exposed to more tax. The only way of reducing this is if they got agricultural relief or business relief. Given that you are so young and not planning to give it away until after you both die, it is difficult to try to plan that at this stage.
Given the different amounts of tax that each person would have to find, it might be easier to simply state the land can be sold and the money divided. The only other reason people might say you made a mess of it was by not enjoying it when you were alive. Mary assured me that there would be no problem with that. CL
in brief
• Making a will is vital in succession planning. • Make sure your wishes are clearly worded. • Review your will every few years or after any major changes.• Tax planning can be difficult if very far in future. • Enjoy it when you are here as well.Donate to
Fovember
Each week through the Money Mentor page, I try to help people with their finances. But we all know that your health is more important than your wealth. With that in mind, we have been running the Fovember campaign, offering free health checks at marts around the country. Our aim is to raise funds for the Irish Cancer Society and Movember. If you have benefited from the Money Mentor page over the years, you might donate a small amount to the great cause. Send your donations to Fovember, Irish Farmers Journal, Irish Farm Center, Bluebell, Dublin 12 or got to go to http://mobro.co/peteryoungifj to donate.
Dear Money Mentor,
I have read your articles on inheritance and the need to make a succession plan. You always seem to centre on where there is children. We don’t have any. We own 30 acres and have decided to split it between two cousins on my side and two of my husband’s sisters. What can we do to ensure that we do not leave it so that they are fighting over it? We don’t want it to be said they made a right mess of that when we are gone. We have made a will but worry that it is not clear. Is there any way that we can set it up to avoid them having to pay it all out in inheritance tax.
Mary
When I rang Mary to have a chat about their plans, it was very obvious that they wanted to be seen to be fair. They were younger than I expected – in their mid-40s – but obviously had thought about the situation.
“We just don’t want to make a mess of it when we are gone,” she told me again. It is 30 acres but there is also a house and stock, so it adds up to over €500,000.
The first positive is that they had made a will. Mary set out the current situation: “As it stands, if one of us dies, it will pass to the other. It we both die, it will be shared out.”
This seems quite clear, but it’s not just what is said but the way it is worded I told her. You want to word it in a way in which there is no reason for doubt. In some ways, it is better to stipulate that your wishes are for it to be sold and the money divided out between the different people you have named.
“What if I wanted to put in a clause that if one of them wanted to buy the others share out they could?” Mary asked.
You have to make sure that the clause states that all the others have to agree to sell to the one who wants to buy and even give a specific timeline in which that must be agreed. The last thing you want is one or two in disagreement and being able to block the sale of the land, leaving it in limbo.
It is also important to review your will every few years, particularly if there has been a significant change in you fortunes. It could also be that someone you wanted to pass a share on to has died before you and you want to change the people who get it.
The other thing I suggested to Mary was to put in place a power or attorney. Not having one is the other issue that can leave things in a mess. I have seen cases where the land is left in limbo if the owner has lost the ability to make their own decisions due to illness. The only way decisions can be made is if the person is put into the care of the State, who then make the decisions. By putting a power of attorney in place, you can put one or more people in charge of your affairs to make decisions.
Tax
On the tax side of things, it really comes down to what capital acquisition tax band the relatives fall into. You husband’s sisters would fall into tax band b and be eligible for €30,150. So, if they got €125,000 each from the will, then around €95,000 would be exposed to the capital gains tax (CGT) of 33%. This would be a bill of around €30,000. What might increase this is if the relatives have already got gifts or inheritance under these bands in the past. Since it is cumulative, they could be exposed to CGT at 33%, increasing the amount that they would have to pay.
Your own cousins would fall into band C, which at €15,075 is even lower. They will be exposed to more tax. The only way of reducing this is if they got agricultural relief or business relief. Given that you are so young and not planning to give it away until after you both die, it is difficult to try to plan that at this stage.
Given the different amounts of tax that each person would have to find, it might be easier to simply state the land can be sold and the money divided. The only other reason people might say you made a mess of it was by not enjoying it when you were alive. Mary assured me that there would be no problem with that. CL
in brief
• Making a will is vital in succession planning. • Make sure your wishes are clearly worded. • Review your will every few years or after any major changes.• Tax planning can be difficult if very far in future. • Enjoy it when you are here as well.Donate to
Fovember
Each week through the Money Mentor page, I try to help people with their finances. But we all know that your health is more important than your wealth. With that in mind, we have been running the Fovember campaign, offering free health checks at marts around the country. Our aim is to raise funds for the Irish Cancer Society and Movember. If you have benefited from the Money Mentor page over the years, you might donate a small amount to the great cause. Send your donations to Fovember, Irish Farmers Journal, Irish Farm Center, Bluebell, Dublin 12 or got to go to http://mobro.co/peteryoungifj to donate.
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