Dominic Coyle answers your queries

Tax implications of bequeathing property

I am widowed and have no offspring. I am contemplating leaving my house, valued at approximately €150,000, in a will to my niece. What would be the tax implications - presumably capital acquisitions tax (CAT) - for the recipient?

Mr O.J., Limerick

You make the point in your letter that you want to plan ahead so that you can rest easier in your later years. This is a very commendable approach and one that too few of us take in relation to the significant financial transaction that is the passing on of even a modest estate on death.

As you rightly surmise, the principal issue in making an inheritance or gift to anyone other than a spouse is CAT, better known as inheritance tax.

There are different thresholds for the tax depending on the relationship between the disponer - you - and the beneficiary. Any bequest from you to a child of your own in 2006 would have a threshold of €478,155.

In your situation, this clearly does not apply and the threshold does drop sharply - by 90 per cent in fact - for gifts or inheritances passed to other linear relations, people such as your niece.

Thus, in 2006 terms, she would be entitled to receive gifts or inheritances of up to €47,815 before becoming liable for CAT. Of course, this figure is cumulative and she would have to take account of any other inheritances or gifts she may have received from linear relations - grandparents, uncles, aunts, siblings.

In addition, the first €3,000 received by any one person from any benefactor in any given year is exempt from calculation for CAT. This effectively raises your niece's CAT threshold on gifts from you and other linear relatives to €50,815.

You should also note that the CAT threshold rises each year to take account of inflation.

Bearing all this in mind, should you die this year, your niece would inherit a property worth, say, €150,000 and would have exemptions totalling €50,815, assuming that she has received no other linear bequests to date. That would leave her with CAT liability on a sum of €99,185. At the CAT rate of 20 per cent, that would leave her with a tax bill of €19,837.

Even if she did not have this to hand, it should be easy enough to raise this sum as a mortgage against the property.

There is one exemption relating to personal property under which your niece would pay no tax.

If she lived in the property for at least three years before it was bequeathed to her and if she owned no other property at the time it passed to her, she would be exempt from CAT, although she would have to live in the property - or a replacement property if this was sold and the proceeds used to buy the other property - for a period of six years after receiving the gift.

Maturity date of SSIA

I started an SSIA account with a rural branch of ACC Bank by lodging €200 late on the evening of May 31st, 2001. What is the maturity date for my account?

I have a handwritten receipt from one of the bank's tellers, stating "ACC banking lodged May 31st, 2001, €200 euro". The following day, I was forwarded a computer-printed receipt from the ACC branch in question, confirming the deposit lodgment to my account. The date of this receipt was June 1st, 2001, at 9:54am.

Mr T.S., Tipperary

I have to say that I never thought that the issue of maturity dates for the special savings incentive accounts (SSIA) scheme could be so complex. I certainly thought that we had covered all available possibilities by now, but there is always one to surprise you.

The basic rule, as you certainly know by now, is that the policies mature at the end of the month that marks the fifth anniversary after they were opened - and, no, this does not mean that the institution can withdraw a 61st contribution from your source account or that the State will pay its 25 per cent bonus on any such contribution.

Nominally, it would appear that your account was opened in May 2001, if only by a matter of minutes - it sounds like you got to your local ACC branch just before they closed the doors.

As you say, you have in your possession a handwritten receipt confirming May 31st 2001 as the date of your first lodgment.

However, you also have a second, automated receipt produced and dated the following morning - and the following month.

You are going to have to check with the bank, but my guess would be that it would defer to the automated receipt when determining the start date for your account. Most financial institutions, as far as I am aware, consider handwritten receipts issued at a branch as more of an aide memoire than a form of contract

While it might be a little bit frustrating, at the end of the day getting the money at the end of May or June should make little real difference to your circumstances.

If you were to need the money in that much of a hurry, you are probably overextended, which should be a concern when you come to determining how you will use the cash.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 10-16 D'Olier Street, Dublin 2 or by 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 questions. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.