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East Cork Business Post The Year-End Financial Planning Checklist


capital gains (CGT) accrued in investment


portfolios,


by GERARD O’BRIEN As we approach the year-


end, it is the perfect time in my opinion to evaluate your financial planning results from 2016 and to contem- plate any actions that need to be made before the end of the year and into 2017. Only last week, I met


with a client and his ac- countant


to discuss year-


end deadlines and how they could potentially impact his overall financial plan. I have noted in this article some of topics we discussed.


Minimizing CGT Tax Some investors may have


from increased share prices for example, and now could be the time to review these gains to see if you can re- duce some of the potential CGT liability at 33%. It is important to note


that the first €1,270 of tax- able gains in a tax year is exempt from CGT. If you are married or in a civil partnership, this exemption is available to each spouse or civil partner but is not transferable.


Minimizing Gift Tax (CAT) If you receive a gift, you


may have to pay gift tax on it. If you receive an inher- itance following a death, it may be liable to inheritance tax. Both these


taxes are


types of Capital Acquisi- tions Tax (CAT). However, the first €3,000 of the total


value of all gifts received from one person in any cal- endar year is exempt. Therefore, for example,


a husband and wife can gift a total of €6,000 (€3,000 each) to each of their chil- dren on annual basis. This type of planning can re- duce a potential CAT bill in the future, whilst at the same time help fund your children for their first car purchase, help with a de- posit on a home or put them through college etc.


Pension


Contributions Pension contributions


provide a means of paying less income tax. Up to Revenue Limits,


contributions to a pension qualify for relief from in- come tax. This effective- ly means that, where the higher rate of income tax is 40% and you are a higher


rate taxpayer, a €100 con- tribution to a pension will only have a net cost to you of €60 (had you not made the contribution, the other €40 would have gone to the government as income tax). You can also reduce your


tax burden by making pen- sion additional voluntary contributions (AVC’s), up to the various age-related limits.


Education Funding Most Parents dream of


giving their children the best possible education and future. Whether this dream includes university, college or a technical school, one thing is for certain: educa- tion funding and it certainly isn’t free. A recent


study found


that the cost of sending each child away to college is about €1,200 per month, considering travel, accom-


Succession Planning by KAREN WALSH


The famous quote by Abraham Lincoln, “Give me six hours to chop down a tree and I will spend the first four sharpening the axe” highlights the impor- tance of preparation be- fore transferring the family farm. Historically farms passed


to the successor, usually the eldest son, on the death of the farmer with little or no planning. Nowadays it is widely acknowledged that greater emphasis on plan- ning for the handover of the family farm to the next generation is vital to ensur- ing future viability and sus- tainability. For anyone


who is


self-employed, retirement is a lengthy process requiring complex decisions concern- ing work, ownership and


management of the busi- ness. The movement from one generation to the next is one of the most problem- atic phases in any business operation especially those that are family owned and run. Farming is one such business in which the farm is five times more likely than any other family business to be passed from generation to generation. Every family and farm


transfer is unique. How- ever, from working with farm families and farm transfers over the years I have learned that there are common factors and advic- es that are applicable to all families. Here are my top ten basic tips on how to implement a successful suc- cession plan to ensure that the transition takes place smoothly. 1. Early planning is es-


sential. There is a great deal to be done before you put pen to paper. Start thinking about succession planning sooner rather than later. Do not leave it too close to your son or daughter’s 35th


birthday, the cut off age for Young Trained Farmer Re- lief, or too late in the year, or when you are in poor health.


2. Make a Will or review


your existing Will. While you are deciding what to do, ensure you have a valid up to date will in place in the event of an unforeseen premature death. If you do not make a Will, your estate will pass according to the rules of intestacy, and the farm may pass to those you would never have intended to inherit it. 3. Make appointments with professionals


as ear-


ly as possible. Speak with your accountant or tax consultant. Consult


your


solicitor well in advance. Make an appointment with your agricultural consult- ant, if necessary. You will need to contact your bank if the lands are mortgaged. Farmers are self-employed and they should check with the Department of Social Protection about


PRSI


contributions and the pen- sion. It is also very impor-


tant for farmers’ wives who have worked on the farm to check their entitlements position. 4. Have a discussion with


your family as early as pos- sible. An open conversation is required with all those involved so misunderstand- ings can be avoided. Do not assume that you know what others are thinking or how they feel about the pro- cess or what they want to achieve from the succession plan. Explain why you have decided to leave the farm to John, divide the farm between John and Paul, or sell the farm and divide the proceeds between John, Paul and Mary. Very often, once people understand the reasons behind your wishes and decisions they accept and respect them. 5. Be aware of the five-


year “look back” rule in re- lation to applying for State support


from the Health


Service Executive when en- tering into a nursing home. Any assets including the farm which parents have transferred in the five-year


Tel: 021 463 8000 • Email: info@eastcorkjournal.ie • Web: www.eastcorkjournal.ie


modation, food and living expenses. This does not include the actual cost of the course, which will vary greatly between institutions and course-type. Saving for your child’s


education is typically a long-term goal to be achieved. As the cost of a university education is set to rise, the need for parents to carefully plan ahead be- comes even more apparent. You should discuss with your advisor the best way to arrange a monthly / quar- terly savings plan in order to achieve your target edu- cation fund.


Review Succession and Estate Planning I


recently met with a


client and her Solicitor to review their estate and suc- cession planning, which we organised for her in 2015. We


reviewed her family


period before entering in to a nursing home are in- cluded in the calculations for the assessment of assets and means of an individu- al. Consequently the only “safe” transfers are those where a clear five year peri- od has elapsed between the time of the transfer and the first application for State support. This is a relatively new consideration for farm- ers when deciding whether to transfer land in their life- time.


6. Decide on a date that


the succession plan will be implemented. This will give you a timeframe to work towards and measure your performance. Have


Thursday, 8th


December 2016


trust, her will, and the struc- ture of an enduring power of attorney organised earli- er this year. In addition, we conducted a beneficiary re- view of all their accounts to ensure there are no changes or updates needed.


Targets for 2017 As part of our 2016 re-


view and outlook, we dis- cussed plans for 2017. My client stated that improving his retirement planning was one of his primary objec- tives for 2017, along with organising a potential com- pany sale later in the year. We have already arranged our next meeting in Janu- ary with his Solicitor and Accountant, where the 3 of us will combine our knowl- edge in creating the best outcome for our mutual client. I maintain that the New


Year is the perfect time to develop a comprehensive personal, family and busi- ness plan. Over the next


such as family farm income, security for the parents and other family members who still have to be provided for. These concerns can be alle- viated by the formation of a registered partnership be- tween the parents and the son or daughter as an inter- im step before considering a full farm transfer. There are very considerable


advan-


tages to forming a partner- ship, for both the parents and the son or daughter. 8. Discuss the tax impli-


you


done what you said you would have done by this month? Have you enquired about what social welfare entitlements you are enti- tled to? Have you spoken with a tax consultant? 7. Consideration should


also be given to forming a partnership with the pro- posed successor. Parents may have different reasons for delaying the transfer of the farm to a son or daugh- ter and these reasons often revolve


around concerns


cations with a tax consult- ant before you put any pen to paper. Ensure you know how much it will cost you. The successor will also need time to find out how much it will cost him or her. En- courage the proposed suc- cessor to obtain the ‘Green Cert’ sooner rather than later.


9. Do address the issue


of fair (equitable) v. equal division of the farm early in the process especially if there


are members


off-farm family involved.


Fair


does not always mean equal and equal does not always mean fair. If John never went to college and stayed at home full time farming


eastcorkjournal


few weeks I would encour- age you to take the time to consider your retirement planning, insurance, educa- tion funding and any other areas of your financial plan. Gerard O’Brien LL.B LL.M CFP® QFA is a Certified Financial Planner and the Owner of Heritage Wealth Management, a Fi- nancial Planning practice based in Main Street, Mid- leton, Cork. For more infor- mation, contact Gerard at gerard@heritagewealth. ie www.heritagewealth. ie


Disclaimer: All data and


information provided with- in this article is for informa- tional purposes only. Her- itage Wealth Management Limited makes no rep- resentations as to accuracy, completeness, suitability, or validity of any information and will not be liable


any errors, omissions or de- lays in this information or any losses, injuries, or dam- ages arising from its use.


and the other children were educated and never farmed, then equal is not fair in that circumstance. One of the most difficult dilemmas many retiring farming fam- ilies face is how to transfer the farm to a young son or daughter who is at home farming the land while still being fair to the non-farm- ing children. 10. Once you transfer the


farm you will no longer be the owner of such a valu- able


asset. Give yourself


time to explore the options and discuss the options with your solicitor to ensure you are comfortable for the rest of your life after the trans- fer. Do you keep a right of residence in the farmhouse for the rest


of your life?


Perhaps you do not wish to transfer the farmhouse now and would prefer to leave it pass in your Will? Do you require a right of mainte- nance out of the property? Mixing business with


pleasure is one thing but mixing business with fam- ily is altogether different and often volatile and dy- namic. While many family businesses collapse


under Continued on next page @eastcorkjournal / #eastcorkjournal


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