I’m confronted with an uncommon predicament. Throughout the years, cash handed over to me by my late mother was not deposited into the bank. I now harbour anxiety about potential inquiries over the source of this money should I decide to bank it.
Records of my late mother’s bankings – specifically those dating seven years prior to her passing – should still be intact. However, if some of the money was received over a decade before her departure, there may be no affirmable proof from where it originated.
Moreover, I worry that unusual spending – for example, property enhancement – could lead to a similar inquisition from the Revenue department.
I admit I may not be alone in this situation, though it brings difficulties nonetheless.
Nor is it unfamiliar for financial exchanges to occur within Irish families. Yet, such transactions could have tax-related strings attached, depending on the nature of the payment.
Revenue departments, indeed, are typically dubious about money appearing unexpectedly, with no trace of a transaction.
The law is unambiguous, however. You are entitled to inherit up to €335,000 from your parents throughout their lifetime, or receive it in parts exceeding €3,000 per year without incurring any tax implications.
Regular followers of this column would be familiar with this provision, known as the small gift exemption. Regardless of who it is from, any coin exceeding €3,000 in a calendar year remains tax-free. However, if the gift is worth more, only the first €3,000 is exempted, and the rest is deducted from your lifetime capital acquisitions tax exemption threshold, which is the above-mentioned figure of €335,000.
Receipts of multiples of €3,000 are permitted with the provision that they are from different donors – say your parents, an uncle, and so on – or received in different years.
The small gift exemption is indeed a worthwhile relief, but it is crucial to maintain some form of record to indicate when the money was paid and by whom.
It’s imperative to convince the Taxation Office that your wealth originates from a legitimate source, and the same goes for banks. Modern regulations aimed at preventing money laundering require banks to ensure that all funds deposited are not derived from criminal activities.
This is precisely where you might encounter significant issues.
I’m baffled that the money was never deposited or held in a facility like a postal bank or credit union. It’s simply inviting complications to have such a substantial amount of money in your home.
You’ve left out crucial details like the exact amount involved or the situation in which you obtained it, but I can gather that the amount is quite substantial if you intend to fund a large project with it. It sounds plausible that you inherited some funds or assets from your mother upon her passing.
Speaking from personal experience handling negotiations with the Taxation Office for others, I believe they are unlikely to retroactively apply the small gift exemption to your case without sufficient evidence. If they accept your claim at all – and this is far from certain – the Tax Office may only acknowledge a yearly exemption and put the remainder against your lifetime limit. Should this exceed your tax exemption limit, especially when taking into account other registered gifts or inheritances, there could potentially be tax implications. The current tax rate stands at 33 percent.
It’s wise to utilise the small gift exemption; however, maintaining a record of transactions is essential. In this era of near-universal online banking, online transfers can easily provide this evidence. However, if you prefer traditional banking methods, you should keep checks, dated notes or other forms of records. Even better if it shows a recurring pattern like yearly payments made at a similar time each year.
Should you possess banking documentation from your mother’s account showcasing significant withdrawals that she likely transferred to you in cash over different periods, this evidence could bolster your case. However, convincing the bank or Revenue that these funds should be considered accumulated, tax-exempt gifts through the years might prove challenging without such evidence.
As for your enquiry regarding banks preserving bank statements, according to information I’ve received from banks, they’re required by the Central Bank’s consumer protection code, currently under assessment, to maintain records for six years following the end of their interaction with a customer. This cessation could be due to the customer’s death or their decision to change banks.
Thus, as your mother’s executor, you may access her banking records as long as it hasn’t been over six years since her passing. If you aren’t the executor, however, the process becomes more complicated because the bank isn’t obliged to engage with you. Instead, you would need to convince the appointed executor to intervene on your behalf.
Whether this will prove useful largely depends on the method your mother used to regularly gift these amounts to you. Identifiable transactions are beneficial, yet if it’s only a sequence of cash withdrawals that you assert corresponds to the money you possess, the Revenue could view this doubtfully.
So what’s your other option? My suggestion is to utilise other banked funds for any property improvement. You could then use the cash you have accumulated for regular expenses typically covered by your bank account.