I am an 83-year-old widower with two grown children to whom all my assets are left in my will. As of now, I will be able to leave each €310,000 in my will tax free. I will leave a substantial amount which will, at present, entail them paying inheritance tax.
Friends tell me that I should do each of the following to mitigate any tax that would be paid above the threshold:
– Open a bank account in joint names. Any money deposited would revert to them less the one-third that belongs to me and it will not affect the €310,000 limit;
– I also have savings certificates. I could put them in joint names and the same principle would apply.
Could this possibly be true?
Mr M.McG., Waterford
Not quite. It certainly sounds very attractive but, as you’d imagine, Revenue would have something to say about it.
It appears to me that what your friends are suggesting is that you avail of something called survivorship.
This is where, in the case of a bank account or any other asset in joint names, the asset passes to the other named owner or owners of the account or asset once you die. Essentially, the asset – or the amount in the account – does not form part of your estate.
However, that’s very different from suggesting that it is not liable for tax. Revenue will want to know the source of the money. That is what will determine the issue of tax liability.
For instance, if the money in the account all comes from your resources, even though it is in the joint names of you and your children, Revenue will still consider it liable for inclusion in any calculation of tax. Similarly, if you put in a third of the funds and each of your children puts in a third each, then, on your death, Revenue will consider a third of all the funds in the account as liable for consideration in assessing tax.
But, my understanding here is that you are considering whether you can legitimately put your money into joint names and therefore avoid those funds being considered when weighing up the €310,000 limit and any tax liability.
Basically, inheritance tax, or capital acquisitions tax, is a tax on wealth. Much and all as we strongly begrudge paying it, there is a strong view among economists that taxing inherited wealth is important in creating a fairer society.
Of course, none of that is very appealing politically to TDs looking to get re-elected and this is why, unsurprisingly, the Government has stated as a matter of policy that it wants to increase the €310,000 threshold to €500,000 over time.
That would keep more of your assets out of reach of the taxman when they pass on to your children. However, with the wriggle room for Minister for Finance Paschal Donohoe looking tighter all the time, it's not clear whether he will have the scope to make any change in the threshold when he announces Budget 2019 on October 9th.
In any case, whatever the threshold, Revenue will consider any of your assets as fair game for assessing tax. If they are passed to your children through survivorship, they are still your assets and still liable to taxation if they bring your children’s inheritance above the €310,000 level.
The same goes for the savings certificates. If they were bought with your money it does not matter whose names they are in as far as tax liability goes.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice
