Welcome to Tax Bytes for Expats, the top tax tips you want to know as an expat. The podcast is here to help answer the common queries and concerns expats have when moving to or from Ireland.

Complex taxes explained simply. We'll focus on the Irish and international tax issues to be aware of to ensure you save time, money and stress.

Hi everyone, this is Steph. Our guest for this week, Mark Westlake, shared a lot with me in this recording, so we decided we were going to split it into two parts.

In this episode, we are introduced to Mark and mainly we speak about why maximising money shouldn't be your goal. We talk about inheritance taxes, Section 72 policies and plenty more.

Hope you enjoy this episode as part one and we'll see you in two weeks for part two. Now let's get into the episode. Hi everyone, hope you're well. Thanks for joining us today.

Today we're joined by Mark Westlake. Mark Westlake, who's a Chartered Financial Planner and the Managing Director at Everlake.

The Everlake team are a financial services business that has particular knowledge of helping people with their financial issues when they're moving to Ireland from places such as the US, the UK and South Africa.

Mark brings a fresh and welcome injection of professionalism and scientific rigour to wealth planning in Ireland.

He's worked as an independent financial planning consultant since 1994, and today he specialises in portfolio management. He's also worked as a senior financial advisor with the National Bank of Ireland and the Royal Bank of Ireland. Thanks so much for taking the time to speak with us, Mark.

Thanks very much, Steph.

You're very welcome. It's a pleasure to be here.

Yeah, great to be able to have a chat. So I think we've got lots to talk about. I know we were talking before we started to record about, you know, just how big this space is. Maybe before we do that, because I don't think I've done your intro justice.

Tell us a little bit about Everlake and so people can kind of, you know, get an understanding as to where you come from, what services you provide and what work your team does.

that's that's a very good question thanks for that so yeah so everlake was formed quite recently as a merger of two businesses and an existing business that i already had running in ireland

since 2008 which was a sort of boutique wealth management tax-based service to essentially families and and uh foreign nationals that have moved to ireland and the reason i picked that

particular niche is because it was me and i i'm come from the uk i am blown and i i've literally literally moved myself from the uk to ireland in 2008 so you know i sort of picked that niche as

being something that i could talk authoritatively about in the first person and having been a financial advisor in the uk for 15 years it sort of meant i had the expertise on both sides of the irish sea so it just made sense now obviously the rate limiting factor is that's not everybody in

the country although according to the last census i think about 20 of the population of ireland are foreign nationals so it's one in five people you meet on the street is in fact a blow-in statistically so it is a big market and that's why we then started

to extend and again obvious markets for us were the u.s i went to penn state university for a year and we have a very close working relationship with a firm in the u.s it's about 100 billion

dollar assets under management so a very very large specialist firm that specializes in expat u.s citizens living around the world so they were a natural fit for working on that side of the

border and our asset management partner is based in johannesburg so the south african connection was very obvious i've just come back from a conference in may this year i was down in on a vineyard attentively listening to speakers for two

days and being distracted by the wine which was very very fulfilling and so yes so ever like then the acquired merged with with a business called ethical financial and i always say the clues in

the name ethical was formed in ireland in 1997 by ray mcnicholas who was the first person to bring a socially responsible ethical fund into the country has grown significantly over the years

and obviously with climate change and the issues around sustainable investing has become much more important for everybody we needed some rigor and some some experience and depth there in that field so that was a natural fit for us in terms of

of our sort of investment piece now obviously not everybody wants to invest sustainably but we all have to live sustainably so it helps us with our with our conversations with our clients about you know what's important to them about money if they've children and family for the future most

of us are a little bit concerned at the moment about what's going on so that was another piece so so if you said what's what's our sort of unique characteristic our defining characteristic as a

firm it's it's really tax which is why we keep talking so much we were saying that we're not investing it's like warren buffett says it's like dieting the concepts are very simple but that

doesn't make it easy and certainly i would say without fear of contradiction investing in ireland is more complicated than any other country in the world the mistake a lot of people make is to just assume that they can leave things where they are in the country where they're coming from and

everything will be fine and i can say that's not the case it's an absolute huge mistake to me i i

think it's interesting what you say there and i'm sure you hear this you know not to kind of scaremonger but it is interesting when people react they hear about the irish tax system how it works how certain foreign investments are are taxed and

you sometimes kind of see the penny drop where they go wow this is not how it was where i'm coming from if there's lots of commentary out there about you know changes that could be made

to the irish tax system that's great but we have to work with what we have and i think you know having a financial advisor who's cognizant of the issues that to me it's just so so worth it

because you know it's quite a niche space it's it's great that in the market there is you know firms like yours helping people navigate this yeah and i wouldn't say that's

normal i mean yeah your typical sort of financial advisor in ireland it looks like a financial advisor from the uk from the early 90s there is no commission ban in ireland the insurance companies

dominate the market in terms of products and products are sold to consumers via intermediaries for commissions australia doesn't look like that south africa doesn't look like that holland doesn't look like that india doesn't look like that the uk doesn't look like that ireland's

alone in a sea of countries that have professionalized and said hang on a second there's a conflict of interest here you know investment products that are sold for commission there is a conflict of interest the bigger the commission the bigger the conflict of interest

let's do something about with regulation hasn't happened here what is the basis then normally mark

what's the fee structure then in these other locations so i mean south africa is a good

example south africa professionalized on its own without being told to do it a group of forward thinking financial planners just decided one day the future wasn't to be dependent on commissions

and i mean you have an accountancy background i mean it's just normal for professionals like lawyers and accountants to say well we have a letter of engagement with our client it sets out what our services are what our fees are what they're going to get for that and how it's going

to work the relationship with a with a broker a financial advisor in in jurisdictions where commissions are still available is that the client comes last in the pecking order so the starting point is the product manufacturer who produces a branded product that can be sold

by sales people and the central bank the regulator in ireland even describes financial advisors as sales people and those products are sold for commissions to consumers so the consumers in blast and heat now in any business what's worth it so you put the client first

you say well start with the client what do they need they need solutions to problems tax is a huge complex problem in ireland it isn't solved by being sold a product by by a salesperson

it's solved by thinking about what you're trying to achieve with your money i completely agree and

you'll see this as well like we'll often work with clients and people will often say where should i invest where should i put my money and i i

i work backwards and go well how much of that income would you like to access and how will that be taxed because essentially there's different tax bands in ireland that can apply to income

depending on your level of income the type of income your your domicile status a lot of factors it's not an easy question to answer and therefore i agree what you're saying you're saying if we

incentivize people to offer those products purely on commission you remove the questions that get the client the best outcome exactly exactly and and i mean

there's there's probably a bigger question i i always sound like the the most flahoola confiser in in the country because i actually encourage people to enjoy the money i actually encourage

people to spend it so so my starting point is actually begin with the end in mind and work backwards and warren buffett put it beautifully in one of his shareholder letters recently he says you know if you don't know how to live lead your life write your own eulogy and write backwards

you know start the back and say what do you want people to say about you what do you want to have achieved where do you want to have been what do you want your children your family and friends to say about you be that person and and actually when you look at it most people

are actually saying well i'm saving money and i'll ask the question what are you saving for and i'll say i don't know just more so the goal here is more money well there's no prizes for

being the richest person at great you can't take it with you so that's not a sensible goal enjoy it you know you know where that comes up very frequently for us and this is probably not

something that you would easily put on an advisory memo but it's something that comes up in conversation with clients is that you know okay so what we're saying here is you need to think about your investments before you come to ireland the tax system can sometimes lead to outcomes you

haven't anticipated but one of the things that sometimes clients will say is oh but okay well what if i'm not a resident or i leave my family in hoth or malahide or wherever it might be and

i'll become a non-resident and spend most of my year outside of the country to avoid paying tax and generally what we say to them is okay we've run this cog for clients before one client

they're a high net worth individual they were going to save about 60 000 euro a year in taxes and when they quantified that they were willing to pay that cost to live the life they want to live

and i think that's exactly to your point is you know enjoy your money make it work but live your life because really you can't bring it with you if the cost of coming to ireland is that you have

to pay a little bit more taxes we'll make that decision on an informed basis and then it really is easier to swallow i think yeah absolutely right i mean it's it's one of the reasons i'm not a

chartered accountant i was doing the chartered accountancy exams in the uk and the question

for tax reasons who should have the children and i just thought well that's not the career for me

who lives like this if i saw that question on a paper that's not it

no i think it was a joke but you know you can see that you can see where that logic comes from it's like what about the children can we put them somewhere in the in the mix of what's important

it's just bonkers you know so but i think people think about money in those terms it's like you know as you said let's live abroad and away from the fact that we're not going to be able to live you know people who work in the middle east you know oh i'm earning tax free and you sort of say

well okay so your choice is i'll leave the family in ireland and go and make the money i'll take them with you and if you take the family out to the middle east they're not going to be happy you know that's that's that's a hard life it's a hard life for a woman it's a hard life for a

family so oh 100 100 and all these situations come up and and you know like one of the other things that i kind of like to communicate to anybody listening to this is that you know one

of the things we try to do is and i think you're very similar in terms of how you operate let's run the numbers like let's actually give you an estimate of what this looks like because i think what happens is and i do this but lots of things we

all become a google warrior we all google what's going to happen you know it's a little bit like when you google i have a headache and the internet tells you you have cancer like it's it's don't

jump to the conclusion without the help of people who have helped you get to that point because you may make a wrong decision and my comment to clients is sometimes it doesn't always have to be

as bad as you think it's going to be the internet will tell you that in ireland we have a 55 percent tax rate that only applies in certain circumstances there's not even that many people who get caught by

that you know of course we do have a marginal rate of 52 which is a stinger but when does it kick in you know what can you use to reduce that and i'm sure that's the type of thing that comes

up in in your work with your clients you know how can we create a holistic outcome for you suited

to your requirements yeah i think you've hit the nail on the head i mean i'm i'm a financial planner right so i'm a chartered financial planner in the uk i'm a certified

financial planner in ireland and whilst i identify professionally as a financial planner i've never met anybody who has a financial goal we're back to the more is better argument you know and and

money is not the end destination people have what i think of as lifestyle goals how do you want to live when do you want to retire what education in the future do you want for your children do you want to help them with house deposits lifestyle goals that have financial implications

how are you going to pay for this okay so a competent financial plan is actually what i call a one-page financial plan which is just a picture and it's we have a piece of software to do it and it's just a fancy version of excel but we put up a one-page

picture which takes somebody's current resources and the rate at which they're spending net of tax etc etc etc make some reasonable assumptions which i can say now without fear of contradiction will all turn out to be wrong with the benefit of hindsight but it doesn't make the process any

less valid make a bunch of assumptions about how things should work normally and what we're able to do is project the current finances out to say age a hundred right so we know my father-in-law's an engineer my father's an engineer the phrase from engineering is measure

everything twice but cut it once so average life expectancy is 84 it means 50 of us can live longer than that let's go out to age 100 so we project everything out to age 100 and what it shows is

how much net worth somebody will have on their 100th birthday based on their current expenditure current income their projections into the future and if that graph is going up and up and up and

up exponentially to 20 million we've seen regularly i'll say to the client you've lived your life i'm only 52 how can you say that well because on the current trajectory all you're going to end up

with is a massive tax bill when you die this isn't if you die it's when you die revenues don't take about a third of that so if you don't have an estate plan don't worry revenue i've got one for

you what do you want to do differently and people will say well i just feel if i do another few years because there's no concept of you're already there you can get off the treadmill of work you've stopped being a wage slave you've made work optional nobody's ever told them that nobody's

ever showed them that and we give people it's the one time when we get to ring a bell and we give people a bell in someone's life and say stop what you're doing and the way we do it is we just turn off their salary and say you've just made yourself unemployed and it almost makes no difference in

most instances it makes no difference to their quality of life and the reason is because they're working to save and pay tax and all the software does is it stops doing that it starts spending the money they've got and i rarely see anybody run out wow yeah and you say well why are you

working this because i thought i needed to nobody told me it was okay to stop that's what i've just said you know and that's not to say on monday morning you're going to retire but could you imagine what it does to your mental health

knowing that you could if you wanted to completely and you know what i think what you're saying there is you give people choices because empowering them yeah you know what i mean because there's

probably a cohort of people who are like well i kind of like my job or i like having something to do that's fine you know work less or work in a location you like or work for less but charity

choice is powerful isn't it you know and that's that's exactly it is that sometimes what people want they're like what is it i should do but the answer is you could do it if you wanted to

do lots of things what is it you want to do and that's really where you kind of get i think to the best outcome and i love seeing it when people kind of realize that you know something isn't as

bad as they thought it was going to be or something i mean the best is when you help people avoid terrible outcomes i mean there is something i think great about that and your point there about

you know if you're dead and the estate a third of it goes to revenue i had this out with my dad the other day he he said to me but hold on a second like if you know if i've earned income

you know the next generation pay 33% on it hasn't it essentially been taxed twice and I was like yeah it has like you know really you don't want to leave a massive estate tax bill because it is

double taxation at its finest at a very I mean we have that in lots of ways in our tax system but it feels worse doesn't it at that point when you're passing it on. Well it does and the phrases

I use is the difference between voluntary capital and involuntary capital so voluntary capital is money that you spend or give away during your lifetime because you can choose where it's allocated. Involuntary capital is money that's taken from your estate on your death and spent

it's just part of the general budget. I drive around Dublin all the time thinking well could somebody fix that hole in the road instead of sticking up another range of plastic bollards it's are you getting value for money in all the money that's being spent now we all have to pay

taxes they get that but as Thomas Jefferson says you know the only thing in life is certain is definite taxes so it's a very soft target for revenue to go after and if you think about it from a psychological point of view you're not really paying it's your heirs and successes it's

your family it's your you know it's not you know it's not you know it's not you know it's not you know it's not you know it's not your problem it's their problem and in order for you to do something that makes another person better off at your expense you've got to be quite quite definition of parade to optimality in

economics you're making other people better off at your own expense that that's hard to do.

Tell me your opinion on section 72 policies.

I may have a view.

Okay you've laughed so I reckon it's a good view and because I obviously don't sell them I refer people on to consider them I generally view that they're probably very

expensive I have a viewpoint of a section 72 policy being exchanging cash now for less tax in future okay so that's one way to think about it for anybody listening a section 72 policy is a

reference to Irish gift and inheritance tax legislation that provides that certain insurance policies that are approved by the revenue commissioners can be used to fund inheritance tax

bills so what that means is to Mark's point you have to hand over 33% of your estate that's not exactly correct in every way.

I know it's not in every situation but the rate is entirely correct the section 72 policy would pay that tax bill for the beneficiary so you could in theory pay your kids taxes for them what do you think of those policies because you'll see what they cost and how they work.

Yeah so so let's let's take one step back because you did make a point about people dying so I mean Winston Churchill is often quoted about the need for life insurance right he said you know

paraphrasing if I had my way I'd write the word insure on the door of every house in the land for people with families and I've just looked at it for about a decade now I'd say I'm sure that's the way the work is going to be. literally just been to meet a widow just recently where there's where there's an insurable interest

and where there's a need to arrange life insurance as a contingency for a catastrophic event that could blow up a financial situation for a family i think life insurance is really really important

it's relatively cheap when you're young uh relative to the the payout it's extremely valuable as one actuary friend of ours said it's uh actually designed to be guaranteed not to be

enforced at the time of a claim right so essentially you're taking out as just in case cover but the chances of you ever claiming that during your lifetime are so slim that the price of and i'm

talking about term assurance here is is very low what you're describing is what's called guaranteed life assurance as distinct from insurance and an assurance policy is assured to pay out it will pay

out when you die so there is a guaranteed element and i struggle with guarantees as a financial advisor because they're very rare in my life most things that we do are not guaranteed so somebody

comes along and says there is a guarantee with this my immediate reaction as an economist is to say who's paying for it right and it's definitely not the insurance company because the insurance company actually

is better at maths than we are so it can pretty much be sure it's the client that's going to pay for it so you've got a guaranteed benefit in the future which will pay out for a fixed premium and

the premium is worked out so that the insurance company makes money from it now interestingly in the past very recent past interest rates were so low that there was a mispricing between the

cost of the cover and the payout and you've got to remember because you're an accountant benefit from life insurance policy is free from personal interest so you've got to remember that there's no capital gains tax no income tax no cat sorry no cgt no exit tax it's a it's a gross policy

so you're getting gross roll up for the whole of your life and a payout which is written essentially under section 72 which means it's used to the extent that's used to pay the cat it's actually

got a 33 percent cat benefit so once you factor in the tax benefits on that for people who don't need it and can afford it out of surplus income it's actually not a bad idea for everybody else

it becomes this increasingly expensive dead weight that they've got to pay for it so it's a gross you've got to carry through the 80s and 90s and at the point where it usually probably would just

about to pay out most of these things have been abandoned and they've been abandoned for various reasons they just can't be they can't afford them people forget why they took it out circumstances

change they've given away the assets so i don't like really really long-term inflexible promises with no get out of jail free card there's no exit from that there's no cash value they don't acquire

a cash value some of these things have been designed in the past to acquire a cash value which was called a unit of cash value and they've been designed to acquire a cash value they're terrible and the reason they're terrible is that the premium is also linked to the performance of the fund so if the fund does very badly your premium goes through the roof and you

can't afford it i don't like them there are better ways of doing it if you came to me and said look mark i've got a client they're you know in their 50s they've got a couple of children they've got a lot of money and we want to do some estate planning i'd say well you know have we thought

about a family partnership for example could they maybe lend some money to the children the children invest it in their name in the next generation all that growth is going to be free from cat because it's already in the kid's name and the loan can be forgiven

given in installments by the parents and turned into gifts which turns it into a catholic event or they can have it repaid back to them which is a form of income and bless them remedy can't tax you spending your own money so it's a potentially very tax efficient income back

to the parents and a very potentially a simple solution to a very complicated problem we prefer that approach certainly for people with a decent amount of money you know million euro plus that's

definitely the way to go um rather than a section 72 so yeah it's a roundabout answer to i really don't like section 72 policies the motivation is that it's a very complicated policy and the motivation for selling them is the very very high upfront commissions that they pay

we're back to where we started yeah conflict of interest exactly so you're saying tell me the

problem i'll give you a solution not here's my solution for your potential problem um okay that's really interesting particularly the the financial kind of explanation around how they work and how they're priced and terrible to think of someone abandoning that after paying into it all that

time that would be heartbreaking thanks for listening to part one of my interview with mark westlake next time we'll hear from mark westlake about optimizing your pension scheme for maximum benefits how you can diversify

your pension across your lifetime and then a little bit about how younger generations approach money thanks for listening in and we'll see you next time

thanks for listening to Tax Bytes for Expats please do leave a rating or review wherever you listen to your podcast and as always remember to take professional tax advice specific to

your personal circumstances before acting or refraining from action in connection with the matters dealt with in this series the material in this podcast is intended to give general guidance only