PERSONAL FINANCE:Your queries answered
Q
If I win the Lotto and want to give my children some of the proceeds, will they be liable for gift tax or will it all be tax free?
- Ms JM, e-mail
A
Lotto winnings are tax-free but, as I understand it, only to those people holding the ticket – ie, the winner or members of the winning syndicate.
If a winner then wants to share those winnings with others – including your own children – my understanding is that, strictly, it will be considered as a gift and come under the provisions of the capital acquisitions tax regime.
It’s not all bad news, however. You can gift €3,000 to each of your children free of tax in any given year, ie, you can give €3,000 to a daughter this year and the same amount again next year, etc.
Once you exceed this threshold, there is another threshold below which gifts are not taxed. Depending on the relationship between the donor and the beneficiary, this second threshold has three bands. In the case of a parent to a child (the highest band), you can “gift” or bequeath up to €331,839 before they face a bill for tax. That figure is down 20 per cent on this time last year, following a sharp cut in thresholds announced in the Budget.
If your child has already received a gift of more than €3,000 in any one year from either parent since December 5th, 1991, it will also serve to reduce the threshold available to her going forward, as all gifts or inheritances within the same band are aggregated from that date.
Are Post Office savings secure?
Q
I have my life savings invested in Post Office savings bonds and certificates as well as some savings on 30-day notice deposit.
It says deposits with the Post Office are guaranteed by the State. However, I keep hearing/reading that Ireland might default on its sovereign debt. If this happens how will it affect my savings in the Post Office?
- Mr JM, Dublin
A
This sort of query is coming up time and again as we find ourselves in unprecedented territory. Security of savings is a real worry, especially for older people whose earning capacity has diminished or disappeared.
An Post savings bonds – and certificates – are guaranteed by the State and the interest on them is free from tax, including the universal social charge.
This guarantee is not the same protection extended by the Minister for Finance to deposits in our troubled banks, although its effect is the same. The State guarantee on An Post savings has always been in situ.
How safe is it? There has been a lot of scaremongering going on and it is causing considerable unease to people in your position. Is it possible that Ireland will default on/restructure its sovereign debt? Yes.
Does that mean that guarantees on savings in An Post will be at risk? I have spoken to people in Government and European Union circles and all concur that no-one, including the IMF, has any interest in wiping out protected savings. The amounts involved will not make the difference between Ireland’s collapse or survival and such action would be counterproductive.
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, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com
