ARF tax treatment on death - 20%, 30% or Nil?

dowtchaboy

A friend recently died, about 18 months after setting up an AMRF+ARF.
She was a widow and 65 when she died, still working and had transferred her PRSA (small enough, only about €80k) into an AMRF of 63,500 and the balance into an ARF. I am not sure if she took some tax-free lump sum at the termination of the PRSA.

Her will leaves the residue of the estate to her adult children after some specific bequests. The estate is not large enough to attract Inheritance tax/CAT.

Most of the websites I have scanned say the AMRF and ARF funds will be paid in full to the estate and 30% tax will be deducted from the payments to the adult children. However one site, the CitizensInformation.ie, says that

If you die before taking any benefit from your fund, the accumulated funds form part of your estate and are distributed accordingly. Capital Acquisitions Tax (CAT) may apply.

If you die after taking benefit and you have invested in an ARF, the remaining funds form part of your estate but are regarded as your income in the year of death. Tax at your marginal rate is deducted and the remaining amount is distributed in the normal way.

http://www.citizensinformation.ie/en/money_and_tax/personal_finance/pensions/personal_pensions.html

Maybe I am reading this wrong but it seems that if she had not "taken any benefit" then the full funds are paid to her estate, and they would then have 30% tax deducted before being paid to the children. However if she HAD taken some benefit then the full amount of funds would be considered income in that year and she would incur quite high income tax, before the balance is paid to the children (this time without deduction of 30% tax).

Perhaps I am misinterpreting what the words "the remaining funds" means.

Her income this year would have just about put her into the 20% tax bracket.

There was one quite small payment from the AMRF/ARF a few days before her 65th birthday- it was not at her request and seems to be some adjustment or perhaps increase in value of the fund over the year - PAYE USC and PRSI were deducted from this payment. So does this constitute "taking a benefit" and has this pushed her children into suffering more tax than otherwise?
Can the executors walk back the small payment to the AMRF/ARF provider as an "error"?

(I've seen figures of 20, 25, 30 and 45% quoted as the adult childrens' tax rate in various sites - maybe it's because there were so many changes over the last 10 years.)

Would appreciate some guidance - thanks.

Mr. Incognito

Let the solicitor administering the estate resolve it