Probate Question

stainluss

I understand that there is a 6 year hold on assets once they are inherited (i.e. upon issuance of a grant) so that they may not be sold in that period.

Can they be used as collateral for a loan?

Any help appreciated

Gertrude2

Someone is spoofing you. However if you do sell inherited assets you might have to pay Capital Gains Tax if they've increased in value since they came into your possession.

stainluss

Gertrude2 wrote: »

Someone is spoofing you. However if you do sell inherited assets you might have to pay Capital Gains Tax if they've increased in value since they came into your possession.

Sorry, you're correct.
The 6 year thing is to avail of agri tax relief (which is like ****ing gold :P).

So its safe to assume this won't be affected by using it as collateral? Or would using it as collateral count as a 'sale' in the eyes of the law?

GusherING

stainluss wrote: »

Sorry, you're correct.
The 6 year thing is to avail of agri tax relief (which is like ****ing gold :P).

So its safe to assume this won't be affected by using it as collateral? Or would using it as collateral count as a 'sale' in the eyes of the law?

I think you are referring to the clawback period on CAT if you availed of the Agricultural CAT Relief.

If you avail of the agricultural relief exemption and then decide to sell on those assets within six years, Revenue will seek to recover the tax you ought to have paid.

The whole purpose of the relief is to encourage farmers to keep their farmlands in the family and pass them on to the next generation (i.e sons/daughters).

There shouldn't be anything preventing you from taking out the likes of a mortgage on the assets however.

coylemj

GusherING wrote: »

There shouldn't be anything preventing you from taking out the likes of a mortgage on the assets however.

I wouldn't be so sure. While I know nothing about agricultural CAT relief, it can happen that if assets are constrained in some way by revenue rules, you either cannot use them as security for a loan or if you do, the money immediately becomes liable for tax. That applied in the past to money in an SSIA account which could not be used as security for a loan and in the case of an approved retirement facility (ARF), using the money as security for a loan counts as a 'distribution' and you are liable to pay PAYE on the money there and then.

I'd consult a tax adviser on this one.

stainluss

coylemj wrote: »

I wouldn't be so sure. While I know nothing about agricultural CAT relief, it can happen that if assets are constrained in some way by revenue rules, you either cannot use them as security for a loan or if you do, the money immediately becomes liable for tax. That applied in the past to money in an SSIA account which could not be used as security for a loan and in the case of an approved retirement facility (ARF), using the money as security for a loan counts as a 'distribution' and you are liable to pay PAYE on the money there and then.

I'd consult a tax adviser on this one.

I attached revenue's response to my email on this - their line seems to be "g'wan ahead and we'll talk about it afterwards" the sneaky dogs :P

I was unsure how to interpret the legislation they put in it also, a lot of it doesn't even seem to apply but I could be missing something...

EDIT: Maybe it's part (b) of the attached that's relevant? Its shrowded in legalspeak so I don't have a clue. Not asking for legal advice, just a bit of clarity on one section of legislation

coylemj

The issue may not so much be with the Revenue as with the bank which takes the land as security for a loan because if you default on the loan and are forced to sell the land, the Revenue would be due a clawback in which case there would be less than the true market value of the land available to discharge the loan. If the bank does it's homework properly, they should really only consider the land as having it's post tax value which would tend to reduce the amount of money you could borrow with the land as security.

That's the theory anyway, there is no blocker mentioned on the Revenue website to you using the land as security for the loan.

stainluss

coylemj wrote: »

The issue may not so much be with the Revenue as with the bank which takes the land as security for a loan because if you default on the loan and are forced to sell the land, the Revenue would be due a clawback in which case there would be less than the true market value of the land available to discharge the loan. If the bank does it's homework properly, they should really only consider the land as having it's post tax value which would tend to reduce the amount of money you could borrow with the land as security.

That's the theory anyway, there is no blocker mentioned on the Revenue website to you using the land as security for the loan.

Thanks for your help.

Yeah I suppose its only fair that the bank use the post-tax figures to decide on a credit line if Revenue would chase them for it - I might even play good Samaritan and go ahead and tell them

coylemj

stainluss wrote: »

Yeah I suppose its only fair that the bank use the post-tax figures to decide on a credit line if Revenue would chase them for it - I might even play good Samaritan and go ahead and tell them

While not encouraging you to be dishonest in your dealings with the bank, it can sometimes not be a good idea to give the other side more information than they ask for - if you get my drift. As long as you give truthful answers to any questions they ask, you have discharged your obligations. It's not the same as taking out a policy of insurance - uberrimae fidei does not apply.