Brexit, the withdrawal of The United Kingdom from the European Union. It’s been in the news for so long already without a major shock to or impact on our lives, that it just sits there in the background. Like a dull ache when in fact it’s going to be a major pain in the you know where.
The real question is whether we face a hard Brexit or a soft Brexit, with the smart money currently favouring the hard option. The reality is that either way, it’s going to have a major impact on our daily lives. For instance, on the food we eat and the price we pay for that food.
The food we eat
Look at the food items on the shelves of the multiples. How much of that arrives on these shelves off the back of trucks that disgorge on a daily basis at Dublin port? Two of the biggest ferries in Europe deposit them here and they then travel our roads to arrive in our locale. Think Tesco and M&S in particular. The German discounters will not be leaving the EU any time soon and they have their own distribution centres here already. After Brexit all these items will be imported from a non EU country. So what?
Britain wants a divorce from the EU, but at the same time a new engagement with the EU, one to replace the other directly. But the EU won’t play ball. Britain can’t have a new deal unless their divorce is first finalised. And all divorces are messy. So it’s going to be some time after Brexit before we can have some degree of normality and certainty with British – Euro trade, meantime all such trade will be conducted on World Trade Organisation terms. Messy! Food items after Brexit?
This was brought home to me during a recent flight from Cork to Faro with Aer Lingus. Feeling peckish, I ordered from the nice cabin crew a bacon and sausage baguette with Ballymaloe relish and a Finn McCool cake. The relish probably influenced me into thinking I was buying local. It turned out that the baguette was from The Brunch Box in Dundonald, Belfast, the cake from Portadown. I presume that this was no coincidence, more an example of economies of scale with BA now owning Aer Lingus and most likely doing a fair business with these companies. No problem there. But the question struck me, what happens these items after Brexit? They will be produced by non EU countries so will go through the same trade arrangements as all other countries that don’t enjoy specific trade arrangements with the EU. They are also food items, so will have to satisfy the rigorous EU food regulations but with no automatic certification to allow full access to EU. That will mean extra time to gain access for every food item. And time means money. So who will pay for the extra cost involved?
The baguette and cake were good for airplane food and served their purpose. But they gave me food for thought. Literally.
We all have milestones in our lives. Moments of significance, particular turning points. They can be monumental or even insignificant in the overall scheme of things, but they are still milestones.
Opening up in private practise 23 years ago was one such milestone, moving to our current offices 16 years ago was another. By comparison, this latest one is minor, teeny even. But I believe it still be be a milestone. We aim to continue to improve in providing value to our clients, value in terms of work done and advices given, and in the manner in which we deliver. We are finalising a range of downloadable advisory booklets on a rang of topics. All available for free.
Our first Advisory Booklet download. “Your own front door: 7 stages in buying your new house”. Its now available for free. Check it out.
There are more in the pipeline, so keep an eye out for them.
We are here for you.
CAPITAL ACQUISITIONS TAX:
Capital Acquisitions Tax applies equally to Gifts and Inheritances, the original distinction now long forgotten. In 2015 CAT raised approx €400m for Government coffers.Even though it is levied at more than 3 times the international average, it’s not going to be reduced here anytime soon.
We, the Taxpayer, are allowed a lifetime Tax Free Threshold on which we don’t pay any tax. The Threshold is dependent on our relationship with the testator (inheritance) or donor (gift). Thresholds and the applicable rate of tax have in recent time become a moveable feast. Look at the differences between 2008 and 2017:
|Rate of Tax||20%||30%||33%|
|Group A Threshold||€521,208.00||€250,000.00||€310,000.00|
Look at the effects of this using various amounts of benefit:
The Capital Acquisitions Tax take on an estate increased from an average of just under 15% in 2008 to almost 28% in 2017! Tax creep in operation.
You work hard during your lifetime to gain reward. You pay your taxes on that reward and you want to leave what you have left on your death to your loved ones, your nearest and dearest. And the Government will take more again, up to 28% of what has already been taxed.
The lesson is simple. Do not ignore estate planning. Tax avoidance is legal, tax evasion is not. Avail of the mechanisms available to reduce the tax payable on your estate. Take expert advice. Consult a Trust and Estate Practitioner.
* Current Tax free Thresholds at May 2017 are: Class A €310,000; Class B €32,500; and Class C €16,250.
Declan O’Toole BCL is a Trust and Estate Practitioner and advises on Estate Planning.
Should I transfer my Bank Accounts into Joint Names?
In advising on Lifetime Planning, the potential for financial abuse is a major and constant concern. One particular example of financial abuse is the misuse and abuse of Joint Bank Accounts. Older people are often encouraged to add the name of a family member or carer to their Bank Account for the convenience of the older person. This is not as simple as it might seem. There are various potential legal implications on transferring a Bank Account into joint names. These will depend on the intention of the original account holder.
This type of situation is quite common in the case of older people, but is not solely limited to them. It certainly arises when people are particularly vulnerable, for example, when being admitted to hospital or long-term care, or where they are physically infirm and unable to access services directly themselves. They are then encouraged to transfer their Bank Accounts into the joint names of some other person, for their convenience. The arrangement is to facilitate the second account holder operate the account on behalf of the older or vulnerable and infirm person. If that is the situation, the new Joint Account Holder merely becomes an Agent for the older person. The legal interest in the account is effectively transferred into joint names, but simply to facilitate this arrangement. The important point is that there is no intention to transfer any beneficial interest. Therefore the presumption of a resulting trust arises. In such a case, on the death of the original account holder, the monies in the account revert on a resulting trust to his or her Estate. They do not pass by survivorship to the joint account holder.
Legal Nature of an “Agency” Account.
The named Joint Account Holder (Agent) only has authority over the money in the account, to the extent agreed by the Original Account Holder (Principal). If the account is opened for the convenience of the Principal only, any withdrawal from the account should be purely for the care and maintenance of the Principal. If there is a specific agreement between the Joint Account Holders, then the provisions of that agreement will apply. Such an agreement is distinct from the contract entered into with the Bank or Credit Union as to the operation of the account and the rights of the Joint Account Holders against the Bank or Credit Union.
If the Principal becomes mentally incapacitated, the relationship of Agent and Principal automatically ends. The operation of the Joint Account then automatically ceases, and the account falls to be operated either by an Attorney under an Enduring Power of Attorney that has been registered, if there is one, or alternatively, where there is no Enduring Power of Attorney, by the Committee of the Ward if the Principal has been adjudicated a Ward of Court. If there is more than 7,500 euro involved then the Principal must be adjudicated a Ward of Court.
On the death of the Principal, the monies in the Joint Account pass on a resulting trust to the Estate of the principal, they do not pass to the surviving Joint Account Holder who has no beneficial interest in the account.
Transfer of Account into Joint Names by way of gift:
If you wish to transfer an account into joint names by way of gift, there must be clear evidence to indicate such an intention. That intention should be contained in the documentation by which the transfer is effected. If this documentation does not reveal your intention, then there must be clear evidence of or proof of such intention to make such a gift. The onus of rebutting the implication of a resulting trust by way of such evidence, rests on the party claiming to be beneficially entitled by survivorship to the monies remaining in the account. The Joint Account Holder will have to produce evidence of an intention to give them the money in the account by way of gift, otherwise the monies will be deemed to be held by way of resulting trust in favour of the Estate of the deceased Principal. Intention is the key word. There must be clear evidence, preferably in writing of such an intention.
There may be Tax implications of making such a gift and these should be considered carefully. Even in circumstances, where it can be proven or shown that there was an intention to make a gift, the question of undue influence may then arise.
Will you transfer your Accounts into Joint Names?
If you are transferring your Accounts into the Joint Names of yourself and another person, you should clearly confirm your intention to the Bank or Credit Union concerned.
- This confirmation should be in writing so that the Bank or Credit Union will note it on your records;
You should clarify whether the Joint Account is for your benefit only with the Joint Account Holder merely acting as your Agent;
- If you intend that you and the other Joint Account Holder(s) should enjoy the benefit of the monies in the Joint Account, you should state such in writing. This in effect will confer a gift on the Joint Account. You should clarify whether this gift is to have affect at the date of the opening of this Account or on your death;
- Is the transfer into Joint Names from Husband to Wife or Father to Child? If so, is it the intention to benefit by way of gift the Wife or Child? Without such clarity, the presumption of advancement will apply.
If it was clear that there was no gift intended and the monies in the Joint Account revert on a resulting trust to the Estate of the original account owner on that persons death, then there can be no question of undue influence.
Where however, it was proved that a gift was intended, then the further question may arise as to whether the original account owner was induced by undue influence into making such a gift.
The Joint Account Holders do not need to be in any special relationship and the transfer does not have to be of manifest disadvantage to the Principal. Once a presumption of undue influence arises, it is then a matter for the Joint Account Holder to rebut that presumption and to show that the Principal entered into the transaction with the full knowledge of its advantages and disadvantages. This will depend on the question of whether the principal had comprehensive and independent legal advice about all aspects of the transaction.
Alternatively, whether or not undue influence applies, the issue of improbity might arise. If it is established that the transfer of Accounts into Joint Names was improvident, the transaction may be set aside on grounds of its improvidence.
Do not simply transfer accounts into Joint Names, instead seek out advice from a Solicitor experienced in advising in Lifetime Planning.
Declan O’Toole BCL TEP is a Trust and Estate Practitioner and advises on Lifetime Planning
Mediation Bill 2017.
Mediation is an Alternative Dispute Resolution (“ADR”) mechanism already well established in Ireland. It is a valuable tool in resolving disputes. It is cost effective and a speedy mechanism in bringing about a resolution. It allows our clients a direct role with first hand involvement in formulating a resolution agreement, rather than having the terms of resolution imposed by a Third Party, such as a Judge or Arbitrator. Mediated solutions are more likely to stick.
Mediation however is not for everyone. It requires a leap of faith and a deep level of commitment on the part of the client for it to work.
Mediation Bill 2017
The Mediation Bill 2017 http://www.oireachtas.ie/viewd contains long awaited proposals for a statutory framework to promote the resolution of disputes through Mediation as a genuine alternative to the institution of Court Proceedings, or as an option where Court Proceedings have already commenced.
It proposes the establishment of the Mediation Council of Ireland. The Council will be required to report to the Minister for Justice and Equality on the adoption of and operation of Mediation as an ADR Mechanism.
Certain types of legal action or proceedings are excluded from Mediation under the terms of this Bill. For example:
- proceedings under the Arbitration Act;
- disputes arising within an employment context where referred to Statutory Disputes-Resolution Processes such as the WorkPlace Relations Commission;
- matters under Tax and Customs Legislation;
- proceedings under the Child Care Acts or the Domestic Violence Acts.
- Judicial Review Proceedings and proceedings against the State in respect of alleged infringements of fundamental rights and freedoms are also excluded.
How will it affect Legal Actions?
If the Bill is enacted in its current guise or form, it will allow the following:
- A Court may, either on foot of Application by either party to a legal action or proceedings, or of its own volition where it considers it appropriate to do so invite the parties to the legal action or proceedings to consider Mediation as a means of seeking a resolution of the dispute before the Court. If the parties decide to engage in Mediation the Proceedings may be adjourned to facilitate same;
- Solicitors will be required to advise clients to consider Mediation as an alternative to Court Proceedings, before Court Proceedings are commenced. We must provide clients with information on Mediation Services, including details of Mediators, and information about the advantages and benefits of Mediation. An Application to institute Court Proceedings will have to be accompanied by a Statutory Declaration by a Solicitor, confirming that the Client has been so advised in the context of the proceedings in question. The Court will adjourn proceedings until the Solicitor proves compliance with these requirements. This simply reflects similar legislative requirements already in place in family law disputes since 1989;
- For the purpose of the Statute of Limitations, the period of time during which Mediation has taken place will be disregarded for the purpose of a Limitation Period. Neither party will therefore be prejudiced with respect to time limits by engaging in Mediation. A Court may, where it considers it just to do so, take into account any unreasonable refusal or failure by a party to consider using Mediation or to attend Mediation, when awarding costs in such proceedings. This cannot be ignored, if the Courts do implement this fully, it could have serious consequences for any party unreasonably refusing to engage in Mediation;
- In any action for personal injuries, the Court will have the power of its own volition, to direct the parties to meet to discuss and attempt to settle the action by means of Mediation;
Why is this a good thing?
The publication of this Bill has been long awaited. The Mediator’s Institute of Ireland (M.I.I.) welcomed the publication of the Bill but has already identified challenges in implementing same, particularly those that could impact on the ability of the Mediator to operate as effectively as possible.
When enacted into law Mediation will be more available and deliver better resolutions, at a lower cost, to those involved in disputes. The M.I.I. amongst other bodies, such as the Law Society, will work closely with the Government and opposition parties in order to fine tune the Bill in order to ensure its effectiveness and expedite its passage through both Houses of the Oireachtas.
Mediation is already a reality. It needs a Statutory Framework to enable it deliver its full potential benefit in dispute resolution. Some will still want, even demand their day in Court. They cannot be denied that right, but they will know that it may turn out to be at their own considerable cost where ADR, particularly Mediation could have delivered a faster cheaper and more personal solution.
Declan O’Toole has been an accredited Mediator and Member of the M.I.I. since 2010.
The Help to Buy Incentive Scheme: Building Slowly.
The Help to Buy (HTB) Incentive Scheme is now operational. It is designed to assist first-time buyers with obtaining the deposit needed to purchase or self build a new house or apartment. Any newly built or self built house or apartment purchased since 19 July 2016, up to a maximum value or price of €500,000 qualifies for the scheme.
The basic essentials are: –
- First-time buyers only, where more than one buying then all must be First Time Buyers;
- New build/self build since 19 July 2016. Properties which have never been used as a dwelling and are now being converted for residential use may qualify;
- Maximum value €500,000 for properties bought after 1st January 2017, €600,000 for properties purchased between 19 July 2016 and 31 December 2016;
- Maximum benefit 5% value of the property, to a maximum of €20,000;
- Principal Private Residences only, no investment properties;
- You must take out a mortgage on the property with a qualifying lender, to be used solely for the purchase or building of the property. The loan should be arranged solely between the first-time buyer and the lender, but a guarantor is allowed on the loan. LTV must be greater than 70%;
- You must be registered for myAccount (PAYE) or ROS (self assessed).
- The builder must be registered with Revenue for the Scheme.
- Subject to a clawback pro rata if you do not retain the property as your principal Private residence for 5 years.
The experience so far:
So far 80% of applications were deemed incomplete. As at February 3rd last of 2,196 applications only 432 were successful and had been approved, with 1,764 still pending. Not all will be successful!.
The figures quoted for the maximum possible benefit are hypothetical or theoretical only. The scheme is one of rebate or a refund of Income Tax and DIRT paid in the four years prior to the date of application. The applicable tax years for an application made in 2017, are for the tax years 2013 – 2016 inclusive. If you have not paid any Income Tax or DIRT in that period, then no rebate can apply. The maximum rebate available is the total amount of tax that you have paid in that period, but the benefit can never exceed 5% of the price of the property.
You must be fully tax compliant. If you have not submitted annual returns (Form12) for those years, you need to do so now. You will need Annual Balancing Statement’s (Form P21) from the Revenue for each of the 4 years in question. Self assessed Applicants must hold eTax Clearance.
Only 31 Builders/developers are registered for the Scheme so far. More registrations are expected to follow within the coming weeks and months.
Builders must also be fully tax compliant in order to register any particular property. They must have up-to-date Tax Clearance Certificates. They must register all properties that qualify for the scheme or are likely to qualify for the scheme during its lifetime. They cannot register individual houses or developments on an ongoing basis.
The benefit will be paid by the Revenue directly to the Builder and never to the Applicant/Purchaser.
How does it Work?
Applications can only be made on line. Firstly, there is the application stage, where you are required to provide your PPSN and a completed declaration. Provided you are tax compliant, you will then be provided with an Application Number and a summary of the maximum relief available to you. You will then be issued with an Access Code separately through “MyEnquiries” in ROS. This information is crucial, your builder or solicitor will require this information to verify your tax relief claim. Keep this information safe.
Secondly, you enter the Claim Stage once you have signed the contract for your home and are ready to make your claim.
Full details can be found on www.revenue.ie.
The Moral of the Story so far:
It’s building slowly, there is a lot of hoops to jump through and paperwork for builders/developers to register their properties for the Scheme. Numbers will improve, it’s in the builders interests to sell on their completed properties and there is an increasing demand for the little stock we have of competed properties.
For you, the first time buyer, get your ducks lined up in a row. Submit your Tax Returns for 2013 – 2016 now, get your P21 Balancing Statements and Summary of Maximum Benefit and Good luck in your quest for your New Home.
Declan O’Toole BCL TEP has been acting for andassisting clients in purchasing and selling property for more than 32 years.
When you go to the bother of making a Will you should at least ensure that it is going to be a valid Will.
Your Will, in order to be valid must satisfy a number of basic requirements:
- It must be in writing;
- You must be over 18 years of age, or married;
- You must be of sound disposing mind – you must enjoy the necessary mental capacity to make a will;
- You must sign your name, make your mark or acknowledge your signature in the presence of two witnesses who must be present together;
- You must sign the Will at it’s foot or end;
- The two witnesses must sign their names in your presence.
Your Will should also follow a certain format:
- It should include your name and address;
- Revoke earlier Wills and codicils;
- Appoint Executors and include their addresses and relationship to you;
- Dispositive provisions;
- Residuary Clause;
- Attestation clause;
- Witnesses Signatures.
Ultimately, your Will, when complete should leave you with a sense of satisfaction. Another box ticked.
Declan O’Toole is a Trust and Estate Practitioner and advises on Wills.
Traditionally, planning for your future meant making a Will, providing for your loved ones and friends after your passing. A will is essential where you wish to plan for such eventuality. It allows you to ensure that your wishes are followed concerning your property and affairs. It can also be useful in planning for the devolution of your estate in a tax efficient manner. You should have a will, and if you do have a will, you should review it at least once every five years.
We have now however adopted a more holistic approach in future planning, we now refer to it as Lifetime planning. If you are prepared to plan for life after your death, why not plan for life before death?
The “Holy Trinity” of Lifetime Planning up until recently comprised of a Will, an Enduring Power of Attorney and an Advance Health-Care Directive.
A will provides for your property and affairs after your passing.
An Enduring Power of Attorney allows you appoint someone to act as your Attorney to make certain decisions for you at a future date when you no longer have the ability to make those decisions for yourself.
An Advance Health-Care Directive allows you appoint someone to act as your healthcare representative to make healthcare decisions on your behalf when you are unable to make them yourself.
A new system of support has now been introduced for people with intellectual disabilities, older people with diminished capacity or dementia and people whose capacity has been affected by traumatic injury.
The Assisted Decision-Making (Capacity) Act 2015 introduced for the first time Decision-Making Assistance Agreements; Co-Decision Making Agreements; and for the appointment of Decision-Making Representative Orders.
It provided for the first time a Statutory presumption of Capacity and a graduated system of support, support meaning different things to different people depending on their needs.
It empowers people to make their own decisions and respect the right of human beings to make choices for themselves and at all times to be treated with dignity and respect.
For Support services check out http://www.sage.thirdageireland.ie
Declan O’Toole BCL TEP is a Trust and Estate Practitioner and advises on Lifetime Planning