Personal Finance: Your queries answered

A lengthy delay in dollar cheque lodgement Q I went to my bank with a cheque for $6,000 from a customer in the US. The bank told me that it would take five or six weeks for the money to clear. Is this possible or is the bank simply ripping me off? – MR S D, Dublin

AIt does seem crazy in a world where money rattles around the globe electronically that it should take up to six weeks to clear a simple cheque, but I am told that this is indeed can be the case.

While banks are all buying into technology and trying to get online to reduce overheads, it appears that cheques are a throwback to a disappearing era.

Put simply, there is no international clearing system for cheques. As a result, the bank here has to send the cheque back to the US bank on which it was drawn – generally via an intermediary – and get it to acknowledge that sufficient funds exist in that account to clear the cheque.

Your bank, Bank of Ireland, tells me that it sends dollar cheques to Deutsche Bank in the US which, in turn, sends the cheque back to the original bank. Archaic, I know, but that is apparently how it works.

The bank tells me the majority of US cheques are cleared in 10 working days but it can take up to 20 working days on occasion.

Other questions arise such as whether your bank will credit you interest from the date you lodge your cheque or when it clears. The same arises on currency exchange rates – where a six-week delay could be significantly disadvantageous.

You are fortunate that, in the case of bank of Ireland, both interest and the conversion rate apply from the date of lodgement.

Tax on US inheritance

Q A sibling, who has lived in the United States for a long time, died recently leaving me a life policy. I am trying to sort out what my position is with inheritance tax. Do I declare the bequest here or in the US?  – Mr P B, Cavan

AInheritance works in different ways in different jurisdictions. In Ireland, the tax – known over here as capital acquisitions tax – is paid by the beneficiary, assuming the inheritance is above certain thresholds in value. The threshold differs depending on the closeness of the relationship between the beneficiary and the person who has died.

In the United States, inheritance tax, or estate tax, is levied on the estate left by the person who has died rather than on the beneficiary. It is the responsibility of the executor to ensure that appropriate tax has been paid before disbursing the assets to the beneficiaries. In the US, this is somewhat complicated by the fact that there can be both federal and state inheritance/ estate tax. The good news for you is that there is a provision in the Double Taxation Convention between Ireland and the US to ensure inheritances do not get taxed twice. It lays down that, for people resident in the US, its taxes take priority.

Ireland is not allowed charge inheritance tax on property outside the State unless the person was domiciled in Ireland. You are not liable to inheritance tax here and any liability in the US has already been taken care of by the executor of your sibling’s estate.

-This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.

Please send your queries to Dominic Coyle, QA,

The Irish Times,

24-28 Tara Street, Dublin 2. E-mail: dcoyle@irishtimes.com