Q&A

All your personal finance questions anwered

Mortgage

I went to live with my mother, who was widowed, in 1980. Because I was working and we were living in a county council house, my mother decided to buy out the house on a 25-year loan. Because I went to live with her, the rent would have been about the same as the mortgage.

My mother died in 1988 without making a will. Since then, I have found out that she did not put my name as a joint owner. I have been making payments since her death and living in the house. I am the only surviving member of the family and there are no nephews/nieces, brothers-in-law, sisters-in-law. What is the financial position about probate? How is it calculated?

J.D., Tipperary

I would suggest that you need to get legal advice rather urgently. You have not provided full details of this situation so I cannot be certain but, as a general rule, people take out life insurance alongside a mortgage. The purpose of this insurance is to pay off any outstanding mortgage debt in the event of the mortgage-holder dying.

You say that your mother did not have your name on the mortgage. As such, any life insurance could not have been dependent on your demise.

The bottom line is that you may well have been making mortgage payments that were not due for the past six years. Without knowing more about the precise details of the mortgage taken out by your mother and any attendant life insurance, I cannot say definitively and that is why I think you should contact a solicitor.

Of course, your mother dying without making a will complicates the situation. In such circumstances, you do not apply for probate. Instead, the estate is organised by an administrator appointed under a Grant of Letters of Administration Intestate.

As your mother had no living spouse and you have no brothers and sisters, you are entitled to apply to administer the estate. Equally, you are likely under the Succession Acts to be the sole beneficiary of the will.

That means that, notwithstanding the fact that your name is not on the deeds of the house, it looks certain to be yours in any case by inheritance. Again, though, you would benefit from a solicitor's advice on the intricacies of administration of your mother's estate.

__________________________________________

First Active

Is the gain for the 990 shares at €6.20 not equal to €6,138 rather than the €5,580 you show in last week's paper?

Mr T.S., email

You are quite right. I got caught up in my own web of figures and forgot to include the gain on the 90 loyalty shares the reader received on the 900 free shares he was awarded when First Active floated. As all the shares are considered to have been acquired at no cost, the full €6.20 a share offer price is considered to be a capital gain. For the 990 shares, this would amount to a capital gain of €6,138.

Your recent answers on the question of capital gains in relation to Eircom and First Active have been extremely hard to follow. Is it not possible to provide a simple answer without complicating the issue with loads of figures?

Mr B.D., Dublin

It's always possible to give a bottom line answer but the fact is that most people writing to this column are interested in more than rote learning. They want to know how a certain answer has been reached. Apart from anything else, it lets them spot when I have missed something (such as the 90 bonus shares in last week's First Active reply).

Setting down the process of arriving at the tax liability also lets people with different shareholdings work out the figures for themselves. Otherwise, the same question for different amounts of, say, First Active stock would be appearing every week.

The truth is that the situation with many Irish companies that has left the exchange recently - such as Eircom, First Active and Jefferson Smurfit - is far from straightforward. There have been splits in assets ahead of privatisation in both Eircom and Smurfit and a capital reduction programme at First Active. For ordinary retail investors unused to filing tax returns, these are confusing situations.

__________________________________________

SSIA rates

In its terms and conditions, Permanent TSB says: "The bank may vary the terms and conditions and the interest charges applicable on an account, including the interest rate structure from time to time." Does this mean that my Government SSIA (fixed interest) could be affected by this condition? Can a fixed rate be subject to change?

Mr P.K., Wicklow

You have no need to worry. While the bank can change its fixed rate from time to time, it cannot retrospectively change a rate agreed with a customer for a particular investment. This works both ways. If you have a fixed-rate loan from the bank and you want to break it by paying off the loan ahead of time, it will almost certainly charge you a penalty for breaking the agreement. The rate agreed on your fixed-rate special savings incentive account (SSIA) is safe.

_________________________________________

Property

My sister and I own a house conjointly, which is estimated to be worth €170,000. Regarding inheritance tax, what happens if (a) she dies first or (b) if I die first? I am away quite a lot and stay overnight in my office. But my house is my main residence. I have no other residence, in fact.

Mr G.B., Kerry

The key determinant is whether both of you actually intend to bequeath your portion of the property to each other. Assuming that is the case, the good news is that neither of you would face a charge for inheritance tax in relation to the house.

The general rule is that people can leave a total of €45,644 to a brother or sister before inheritance tax (more properly known as capital acquisitions tax) kicks in.

However, the former minister for finance, Mr McCreevy, was persuaded to make special provision for siblings living together.

At the time, house prices were rising so dramatically that elderly people were facing huge inheritance tax bills on property left to them. The relief allows people to reduce by 80 per cent or €190,461 the value of the property for inheritance tax purposes, whichever is the lesser. In your case, clearly the 80 per cent reduction would be the lesser. Given that you already own half the house, you would be reducing the value of the other half, € 85,000, by 80 per cent, bringing it down to €17,000.

There are some conditions. First, the person inheriting must be older than 55 and they must be a brother or sister of the person bequeathing the house. They must also have lived with each other in the house for at least five years prior to inheriting the property and must not own any other house.

The fact that you are away a fair bit and occasionally sleep elsewhere does not undermine a claim. The key thing is that this is, for each of you, your principal private residence or home.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.