Help. No clue what to do with cash.

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XXGCXX

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Personal details

Age: 41

Spouse's age: NA

Number and age of children: 1 at college





Income and expenditure

Annual gross income: 90K

Monthly take-home pay: €4300 after home loan , med insurance, life insurance





Type of employment: Public Sector



In general are you: Saving mostly for holidays, college fees, home renovations, etc



Summary of Assets and Liabilities

Family home value: 900,000

Mortgage on family home: 50,000

Net equity: 850,000



Cash: 1,200,000



Company shares : n/a



Family home mortgage information

Lender: Home loan Credit Union

Remaining term: 10 years

Monthly repayment: 500 stopped from wages



Other borrowings – car loans/personal loans etc

No other borrowings

No Credit Card



Pension information

Value of pension fund me: approx 100k lump and 600 per week. Can retire at 50.

Some AVCs few thousand

Pension: public sector pension



Buy to let properties

None as of yet



Other savings and investments:

Cash savings as above in various accounts , current , Revolut etc





What specific question do you have or what issues are of concern to you?



I have recently come into a large sum of money and would like to make some passive income from this. I would feel my pension is adequate and am in a decent position with my current home. So wouldn’t have any concerns there. I was considering trading up and putting my cash into this but have decided against it. Was considering buying a property for or with my son gifting him the property or half it if I stay half owner. Failing this maybe a property to rent. Or Is it even worth buying a property to rent ? I haven’t a clue where to start and obviously can’t just leave all that money sitting in my bank account. Would have zero clue re shares, crypto, bonds etc. Don’t even know where to go to get advice, any recommendations?
 
XXGCXX said:
Personal details

Age: 41

Spouse's age: NA

Number and age of children: 1 at college





Income and expenditure

Annual gross income: 90K

Monthly take-home pay: €4300 after home loan , med insurance, life insurance





Type of employment: Public Sector



In general are you: Saving mostly for holidays, college fees, home renovations, etc



Summary of Assets and Liabilities

Family home value: 900,000

Mortgage on family home: 50,000

Net equity: 850,000



Cash: 1,200,000



Company shares : n/a



Family home mortgage information

Lender: Home loan Credit Union

Remaining term: 10 years

Monthly repayment: 500 stopped from wages



Other borrowings – car loans/personal loans etc

No other borrowings

No Credit Card



Pension information

Value of pension fund me: approx 100k lump and 600 per week. Can retire at 50.

Some AVCs few thousand

Pension: public sector pension



Buy to let properties

None as of yet



Other savings and investments:

Cash savings as above in various accounts , current , Revolut etc





What specific question do you have or what issues are of concern to you?



I have recently come into a large sum of money and would like to make some passive income from this. I would feel my pension is adequate and am in a decent position with my current home. So wouldn’t have any concerns there. I was considering trading up and putting my cash into this but have decided against it. Was considering buying a property for or with my son gifting him the property or half it if I stay half owner. Failing this maybe a property to rent. Or Is it even worth buying a property to rent ? I haven’t a clue where to start and obviously can’t just leave all that money sitting in my bank account. Would have zero clue re shares, crypto, bonds etc. Don’t even know where to go to get advice, any recommendations?
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Dont do anything for 6 months. Go onto this website for the next number of months. Read all posts daily any way relevant to your situation.
Money makeover/investment/financial advise etc etc posts. Then seek advice/make up your mind what to do.
Your heavy lifting is done. Dont be lazy. Dont go and fall at the last fence. Good luck.
 
Clear the mortgage. Look closely at your house and upgrade it to meet your needs for the next 20/30 years. Maximise your pension contributions annually. Start giving your son €3K annually as a tax free gift for his long term saving plans.

Take care of your health, buy the e-bike or join the local gym. What ever suits you best.

Then spend some time considering what type of lifestyle you want into the future. What are you hobbies, interests, passions. If you had all the time in the world what would you do.

Then engage with an independent financial advisor who will explore with you what you want to achieve with the money, your appetite for risk, short, medium and long term financial goals, and they will give you good advice, on where to put your money, what works best for you and your son. Steven Barrett and Marc are both regular posters on here who are independent advisors. Check out their posts and if they resonate with you make an appointment.
 
So the first thing to do is to avoid making any big mistakes with the money. For example, you mention that you know nothing about crypto. Stay that way. Don't learn about it. Don't be tempted.

Second thing to do is to clear your mortgage.

So, what are your financial objectives in life? They are pretty well sorted at this stage. You have your final home with no mortgage. You have a good job. I don't fully understand your pension comments. But maximising your pension contributions is always a good idea.

Next, I think is to sort out your son's long-term housing needs.
This is a tough one. You can buy him a house outright. But perhaps this is not the right time for that. And maybe it's not a good idea to gift him a house. You must make that call about his financial maturity.

But your objective is to sort out his housing needs when he is ready. When he is ready, you should lend him the money to buy a house. I think that is better than gifting. It could be interest and repayment free. Or you might make it interest-free but require a repayment which is good discipline.

Let's assume that you spend €500k on your son's house. Where would you put it in the meantime?

The key is to retain access to it. If you invest it in property and then you need it to help your son, you will not be able to access it. Another example would be if you saw the home of your dreams and wanted to buy it. You would have to sell either your own home or the investment properties and that would take too much time. So keeping access to your funds is critical.

The best and simplest long-term investment is to buy a portfolio of directly held shares. They will go up and down in value. But should do well over your investment horizon which is long-term. Every investment is risky but a portfolio of shares is probably the least risky over the long-term. Cash is risky. It can be reduced in value or even wiped out by inflation.

And you can handle the risk and hold onto the shares for the longer-term.

Be very careful about a financial advisor. If you choose to use one, make sure you use one who charges you an hourly fee. Most advisors will simply sell you an investment product that maximises the commission for them. Steven Barrett was recommended above. You can see his posts here https://www.askaboutmoney.com/members/steven-barrett.81384/



Brendan
 
You mention retiring at 50. Do you enjoy your job? You are well paid with early retirement so you are probably happy enough to stay.

But you are in a financial position to review your life goals. If you don't like your job, you could afford to go back to College or retrain for something else. That would be a great use of your money.

Brendan
 
Thank you for the replies, much appreciated. I think it might be time to make an appointment with someone.

Apologies my pension is worth 100k lump sum on retirement and then about 600 euro per week.

What are the tax implications of lending my son the money to buy a house? Would this come out of his inheritance? Could I in theory lend him the money and take a monthly repayment from him?

Or what are the implications of me purchasing the house in my name and allowing him to live there. I know there is an exemption whilst he would be in education but down the line if I had a second property he was living in am I liable to pay tax? I suppose what I’d be concerned about loaning him a large sum of money or gifting it to him and paying whatever inheritance tax is due, would be that down the line if he was cohabiting and the relationship broke down would his partner have a stake in things. Big what ifs I know but still something to consider.

A lot to consider. Bricks and mortar would have been what I would have always been told to invest in growing up. But times have changed a lot. Again thanks for the advice
 
So your pension is very well funded as well. But if there is scope to top it up , you should do so.

Presumably he is going to inherit or be gifted €1m in time. So you might as well face up to the tax consequences of this.

Part of the reason for suggesting a loan is that in the event of a break-up of his relationship, his assets would be the house - the mortgage.

If you lend him €300k interest-free, the notional interest would be treated as a gift. Not sure that that is but probably around €9,000 a year.

But don't let the tax dog wag the tail.

Decide what is best - a gift or a loan or whatever and then do that.

You could buy a house and let him live there rent-free. But the problem with that is that any gain in value would be subject to CGT when you sell it.
If he buys it with a loan from you and lives in it, there would be no CGT on any gain when he sells it.

Irish people do tend to invest in property. But you already have €900k in property. That is enough. You should diversify your risk.

Brendan
 
It is a public service pension, so there isn't any fund.

You could increase the contributions to your AVC.

You say that you can retire from age 50. That is unusual in the public service. Maybe you are a soldier.
 
Giving your son an interest free or a very low interest only loan of say €500K to buy a house is the best tax efficient way to help him buy a house. The principle being repaid to your estate on your death.

when you die your assets will be
House €900K
Cash €500K
Loan €500K

Total 1.9 million.

You son will pay tax on 1.9mil - 325k = €1.575 mil
So €520K tax paid.

Your son will end up with €1.3M after he pays tax and sells your house. This will be €880K in cash and €0 owing in the loan. He will have had the benefit of the €500 K to buy the house all those years before you die and there is no CGT on the house for the estate.

You worry about your son having a liability if he cohabitates with a partner and they split etc. if they split their assets would be the house value - any loans. So they are together 10 years and split without kids. The house is now worth €600K so their assets are €100K. It would probably be prudent for your son to pay the girlfriend €50K for a clean split without any hassle or arguments about who owns what asset. If there are kids, then of course their stable housing would be a priority, so your son should do everything he can to ensure they have a place to live with either parent.
 
Clamball said:
Giving your son an interest free or a very low interest only loan of say €500K to buy a house is the best tax efficient way to help him buy a house. The principle being repaid to your estate on your death.

when you die your assets will be
House €900K
Cash €500K
Loan €500K

Total 1.9 million.

You son will pay tax on 1.9mil - 325k = €1.575 mil
So €520K tax paid.

Your son will end up with €1.3M after he pays tax and sells your house. This will be €880K in cash and €0 owing in the loan. He will have had the benefit of the €500 K to buy the house all those years before you die and there is no CGT on the house for the estate.

You worry about your son having a liability if he cohabitates with a partner and they split etc. if they split their assets would be the house value - any loans. So they are together 10 years and split without kids. The house is now worth €600K so their assets are €100K. It would probably be prudent for your son to pay the girlfriend €50K for a clean split without any hassle or arguments about who owns what asset. If there are kids, then of course their stable housing would be a priority, so your son should do everything he can to ensure they have a place to live with either parent.
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There will be a tax liability on the interest foregone but can the €3000 a year gift exemption can be subtracted from that?
 
XXGCXX said:
I have recently come into a large sum of money and would like to make some passive income from this. Was considering buying a property for or with my son gifting him the property or half it if I stay half owner. Failing this maybe a property to rent. Or Is it even worth buying a property to rent ? I haven’t a clue where to start and obviously can’t just leave all that money sitting in my bank account. Would have zero clue re shares, crypto, bonds etc. Don’t even know where to go to get advice, any recommendations?
Click to expand...
Renting a property isn't passive. And the more properties you have, the more work it involves.

With coming into such a big amount of money, do the simple and obvious things first:

  1. Pay off your mortgage
  2. Max out your pension contribution for last year and this year
Then you have to start thinking about how you want this money to help you for the rest of your life and what you want that life to look like. It is more than just where to put the money.

I advise against buying your son a house. We spend decades raising children and part of that raising is to make them independent and that includes managing money, saving and getting a loan for their own home. Yes, help them out financially but giving them a free house with no debt is not good for their development.

When you have had a think about what life you want, tailor what you want to do with the money around that so you can have that life.


Steven
www.bluewaterfp.ie
 
Far better financial experts here than I so I'll leave this advice to them, but if I was in your boat - 41 year's young, 850k equity in my home and 1.2 mil in the bank, I would go to a major sporting event every year - The Masters, Wimbledon, Monaco Grand Prix, Lion's Tour etc
 
  • You mentioned you have recently come into a large sum of money. Starting point should be to ensure that you tax affairs are all in order.
  • Then clear all of the debt and you could consider taking the saving from that and adding it into your pension
  • Is there anything you need to do in the house, insulation, decoration, 60 inch TV maybe.? Use some of the money to give you the best quality of life you can.
  • You're right to help your son but don't make him too dependent on you. Ensure he still has an incentive to go out to work every day.
  • Ensure your will is up to date and, especially once the mortgage is paid off, review your life assurance and health insurance.
  • Whats the bucket list?, you have the money now to tick some of those off
 
Brendan Burgess said:
Good point.
As you are wealthy, you won't need life insurance.

At 41, you could probably skip health insurance as well.

Brendan
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Life assurance- It all depends on what you want to leave your family bit it wouldn't be needed for the house.

As for health insurance, it's less about money and more about access. In other words, if you break you arm in Limerick, do you want to go to the local A&E or into the VHI 24 hr clinic?
 
thedaddyman said:
if you break you arm in Limerick, do you want to go to the local A&E or into the VHI 24 hr clinic?
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Go into whatever private clinic there is and pay your own bills.

That might be a Dublin centric point of view because we have plenty of A&Es not linked to health insurance companies.

Not sure about Limerick. Can you not pay for a private A&E?

Brendan
 
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