As readers from previous posts will know, the second part of our Annual Business Information Seminar focused on Strategies for protecting personal, family and business wealth.

Richie O’Neill from Zurich Life presented an excellent, very humorous (especially considering the topic!) presentation which was very well received.

As Richie pointed out, whilst we very much stick our head in the sand when it comes to death and serious illness, as none of us like to think of it, it is inevitable. Preparation is key. However for some, death will come in their prime, leaving devastated families behind hence it is more important than ever to be financially organised.

So what can happen if you or your loved one dies? We can ask this in relation to the following;

Does your family inherit your debt?
Can they access your current account?
Do you have to you pay your mortgage if it is in your spouses name?
Life Assurance Contracts
Pensions Provisions

Many people are unaware of the fact that bank accounts, if in sole names, are frozen once the bank is notified of the death of the account holder. A practical step here is to make sure the account is in joint names.

In relation to mortgage accounts, most banks will allow a moratorium on the payments due until a claim is paid. However the best thing to do is to ensure that your mortgage protection plan is assigned to the mortgage lender.

If you have a life policy how do you avoid probate? If a plan has terminal illness benefit, it can be paid out without delay on confirmation of terminal illness. If you have a single life plan, have them assigned or placed in trust.

Similarly if you have a single life savings/investment plan, ensure it is assigned to your spouse, thus ensuring assets are passed tax free. In general savings and investment plans should be place in trust; this does not alleviate any tax liability but proceeds would be paid to beneficiaries in an efficient manner.

What happens to pensions? The proceeds of Personal pension plans are paid in full to the estate/spouse (tax free) on notification of death. If partial access required, an option is to transfer the Personal plan to PRSA’s (Personal Retirement Savings Account’s). PRSA’s and Buy Out Bond’s are similiar to Personal pension plans insofar as they transfer to the the spouse tax free or to the estate on proof of death.

A major point of note in relation to Executive Pension Plans is that a maximum of 4 times final salary is paid as tax free lump sum. The balance of the pension fund has to be used to purchase an annuity.

A solution to this is to preserve the benefit within the Executive Pension Scheme arrangement. Alternatively the benefits can be transferred to a Personal Retirement Plan or a PRSA (only if 15 years Scheme membership). However future funding will have to be approved by Revenue.

Richie also highlighted the fact not everyone automatically qualifies for the State Pension; in order to qualify you have to commence paying PRSI by age 56 and have paid more than 520 contributions. The Qualifying adult allowance is means tested.

Richie also assessed the tax treatment of ARF’s on death.

To conclude his presentation, Richie spoke about Inheritance tax issues. Capital Acquisition tax receipts are significant in Ireland and rising steadily.

There are exemptions available namely:
Spouses Exemption
Registered Civil Partnership
Dwelling House Exemption
Support for Education – up to age 25

Inheritance tax planning is vital and planning is essential. One can;

Draw up a will thus maximising the use of thresholds and reliefs
Discretionary trusts can be put in place
Use of the €3,000 Small Gifts Exemptions
Section 72 Whole Of Life plans can be used to cover the liability

Richie also highlighted the area of co-habiting couples and the fact that for the purposes of inheritance tax purposes they are treated as strangers thus the Group C threshold of €16,250 applies.

Life policies can be set up but care needs to be exercised in how they are set up as this may add to a potential CAT liability.  In plans effected on each other’s lives are best.

As I’ve mentioned the presentation was very well received and highlighted a lot of practical, need to know issues we can all benefit from.

If you have any questions on any of the issues raised above do contact us on 053 9223640.