Case Study 3: The Case of Mr & Mrs ‘Got-Too-Much’

Paddy and Angela were in their late 60’s and happily enjoying their retirement. And so they should! Paddy had worked long and hard in a company that he had helped to grow over many years. He had benefited from his share options and accumulated some real wealth. They had plenty of income in retirement from his final salary pension, rental income from some apartment units, interest off their savings and dividends off their shares. They already had a big number and were enjoying their lives.

As ‘empty nesters’ they were about to downscale “RIGHTSIZE” the family home – their three children had all moved on and their five bedroom house was just too big for them now. They had found an apartment in a nice area. Perfect. This property move would soon see another €600,000 going from bricks and mortar into savings.

But what, if any, were the implications? And what did it mean in terms of Inheritance Tax? A golfing pal encouraged Paddy to meet with Lifestyle Financial Planners.

First, we spent some time getting to know Paddy and Angela. It was important to understand the facts around what they had accumulated – their capital position, and their sources of income. We then helped them to identify the cost of the lifestyle they wanted to continue to enjoy. We also delved into what else they might like to do in their lifetime in order to get the most from their remaining years.

Then he ‘crunched their number’.

This is what he found. Based on their conservative assumptions, allowing for inflation and for the potential costs of long term nursing care, Paddy and Angela would NEVER run out of money. In fact, their wealth would continue to grow, even after allowing for extra expenditure.

But they had a big problem – a different problem to most. They weren’t going to run out of money, but die with TOO MUCH!

Why’s that a problem, you may well ask? Because, despite paying hefty taxes for many years on everything they’d ever earned (Tax, PRSI & USC), on pretty much everything they’d ever spent (VAT), on Paddy’s shares in the company and everything they’d ever sold (CGT), on every property they’d ever bought (Stamp Duty), all they ever seemed to encounter was Tax. Tax. Tax!

But there was an even bigger tax bill just down the road.

We helped Paddy and Angela to realise the size of the problem. We alerted them to the fact that much of their hard earned estate was going to benefit the Revenue, who had already done very well from them. If they died soon their Inheritance Tax bill was going to be well over €1 million. If they lived longer, it was going to be more and get progressively worse, the longer they lived.

But it didn’t have to be that way. We helped Paddy and Angela work out just how much more they could afford to spend, how much they could afford to pass on to their children right NOW, and how much they could drip feed to their family over the years without ever running out. We helped them create a carefully structured “Spending & Gifting programme” and a Revenue approved Section 72 plan set up specifically to pay the inheritance tax liability.

Paddy and Angela are now on course to eliminate their Inheritance Tax liability, to manage their wealth in a way that gives them the life they want, and to gradually pass funds down to their family so the Tax man is no longer the main beneficiary.

And all this is only possible, because Paddy and Angela now know, and understand, their number.

It pays to know your number! Do you know yours, or would you like to?

Get in touch today!

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