Holding shares in Crest account is more secure


Q&A: Holding shares in certificated form can be costly. Is there a personal Crest account or other method for holding non-certificated shares under one’s personal control and, if yes, what conditions apply ?

Mr MC, Co Westmeath

There are essentially two ways of holding shares – in paper and electronically. Within electronic accounts, there are also, generally, two options: you can have either a nominee account or a Crest account.

Electronic accounts are clearly safer than paper certification. If you lose the certificate, you can face considerable cost and trouble replacing them, to say nothing of the delay in executing a trade in your shares on the most favourable terms.

In any case, most markets are phasing out paper certificates, for reasons both of security and convenience.

There are different forms of electronic account. Most electronic holdings are held by a client’s broker through a nominee account. This can be useful for some people who do not want to see their name on any shareholder register and are happy to delegate all decisions to the broker.

For those who prefer to have a more hands-on approach to share ownership, a Crest account is a better idea.

Like a nominee account, the holding is electronic but the shareholder’s name appears on the share register.

Anyone over the age of 18 can become a personal Crest member but they must use a “sponsor” – ie a stockbroker.

The main advantages of Crest membership is that you will be entitled to direct communication from the company where, for nominees, the company communicates only with the broker.

As your name is on the share register, you will receive all corporate mailings and will have the right to attend meetings in personal capacity and vote your shares.

You will also receive any dividends due on the stock personally rather than via your broker.

While you would think that this personal control of your affairs would relieve brokers of some of the duties involved in managing clients of nominee accounts, the fact is that you are likely to pay more for a personal Crest account than a nominee account.

Looking for loopholes in inheritance tax

As regards children having to pay inheritance tax on money bequeathed to them by a parent, I know the limit is €225,000. Is there any loophole where a parent can pay Revenue an amount before passing on so as to reduce the amount of tax a son/daughter would have to pay on the death of the parent when the amount is much greater than the €225,000?

Ms MC, Galway

I very much doubt it. I’m not sure why Revenue would accept a payment in lieu of capital acquisitions tax that could end up being well shy of any ultimate inheritance tax due.

Presumably if there is an estate of more than €225,000 in value, there will be assets to meet any bill.

Prepayment aside, there is one loophole, if that’s what you wish to call it, that can radically reduce an inheritance tax bill.

Dwelling house relief allows someone to receive the family home free of inheritance tax.

However, as you might expect, fairly stringent criteria apply. First, your daughter must be living in the property for at least three years at the time she receives the inheritance. In addition, it must be their only, or principal, residence over that period.

She must also be required to live there because the owner relies on her due to old age (ie over 65) or infirmity.

At the time she inherits, she must not own or have any financial or beneficial interest in any other property. Otherwise, she is excluded from this relief.

Following the inheritance, she will be obliged to live in the property for a further six years.

If she does not, the Revenue can claw back capital acquisitions tax that would have been payable on the value of the property.

If, however, she sells the house for another one, the occupancy rule can apply to both as long as they remain her only residence.

If she has to go abroad for work after she inherits, that will not count against her in occupancy terms.

This column is a reader service and is not intended to replace professional advice. Please send your questions to QA, c/o Dominic Coyle, The Irish Times, 24-28 Tara Street, Dublin 2, or to dcoyle@irishtimes.com. No personal correspondence will be entered into.