So you spent most of the day Zooming at home, you're tired, emotional and in need of a good night’s sleep. Barely had time to eat, two cups of tea and an apple. You then spot your lotto ticket and for the craic check to see if you won anything… the slow realisation comes across your brain… you have just won € 12.7million … YOU HAVE JUST WON € 12.7million!!!
John Lowe of MoneyDoctors.ie takes a look at some of the steps you might take…
1. Lodge the funds with a deposit-taker
Finding a bank that is NOT going to charge you for depositing a sum of this magnitude is the first port of call.
- Currently credit unions are being charged interest by AIB Bank (0.65%) and Bank of Ireland (0.4%) the two pillar banks, for credit unions’ surplus funds deposited with them… large deposit holders in those same banks will be next.
- The best demand rate in the country is 0.01% (0.0067% after DIRT Tax) so your €12.7million if you could find a willing deposit taker will earn € 70.91 per month after DIRT tax !
- You might also buy a home (€2million?) and a new car (Mercedes AMG s650 – a mere €250,000?) and a huge party holiday celebration (€250,000)
2. Safe deposits
a) National Treasury Management Agency (NTMA) are a government body that manages all government funds including those in An Post and while the return is paltry all their investments are government guaranteed including their State Savings suite of investments:
- National Solidarity Bond ..10 year investment yielding 10% tax free on maturity ( equivalent to a gross annual rate of 1.43% - the best deposit return in the country ! ) Maximum investment is € 120,000 per person and any withdrawals before maturity lose any interest earned on those sums.
- National Solidarity Bond also have a 4 year option yielding 2% tax free on maturity - maximum investment is € 120,000 per person.
- National Saving Certificate.. 5 years investment yielding 3% tax free on maturity.. maximum investment € 120,000.
- National Savings Bond .. 3 year investment yielding 1% tax free on maturity…. maximum investment € 120,000.
- Prize Bonds ( joint venture with FEXCO, the Kerry company) no interest and max investment € 250,000 per person - just remember that you cannot withdraw for the first three months, you must give 7 days’ notice of withdrawal, and you are in the draw from day one…
b) All other deposit takers – up to € 100,000 per person in the 6 main banks are guaranteed by the Deposit Protection Scheme – up to € 100,000 per person per institution.
c) Some credit unions in general have all reduced their deposit thresholds to as low as € 15,000 but your own credit union – where you live or work – might just allow that € 100,000 threshold (also covered by the Deposit Protection Scheme).
d) An Post – monies in post office accounts are also covered by the Deposit Protection Scheme.
That takes care of the deposit accounts and guarantees. If you as the Lotto winner have a partner (married or civil union) then you can double the above thresholds in cash holdings. Children are different because they will be subject to the Capital Acquisition Tax or inheritance tax thresholds.
3. Inheritance / Capital Acquisition Tax
You don’t have to die to give away your money…
- Parent to child – € 335,000 each tax free
- Sister/brother, nephew/niece, uncle/aunt, grandchildren - € 32,500 each tax free
- Everyone else ( including me ) - € 16,250 each tax free.
4. Charity / philanthropy
Warren Buffett, one of the world’s richest people, in the last five years has given away €14.7billion and is the #1 philanthropist in the Forbes magazine list. Chuck Feeney had the same philosophy "giving while living"… maybe you might allocate minimum €1million here…
The stock market has the best returns of any asset class over any period of time including property.. but you need time - as Warren Buffett once said: "The stock market is a mechanism for transferring wealth from the impatient to the patient."
10% of your wealth/portfolio should be in a precious metal .- gold being the obvious choice and standard. Currently priced at c. $1,747 per troy ounce – so seven stone weight would set you back $ 2,739,296 ( €2,282,747 at $1.20 to the euro). Don’t forget silver, platinum, palladium …
Then there are
- Index funds, ETFs, other sophisticated investment vehicles. You would need expert advice on this but good to have some exposure here.
- Managed funds are easier to understand and generally have a safety net in the lower numbered funds are normally all cash / government and corporate bonds, etc. Therefore a safe haven in volatile times.
- Alternative investments or your favourite collectibles such as art, wine investment, antiques, rock 'n roll memorabilia, numismatics or philately, scripopoly, or cryptocurrencies (a real punt).
There you have it – all sorted, safe and happy for the rest of your life…. or are you? Sleep well.