Avoiding inheritance tax

Dr Brown

A mate of mine plans to sell his house before he dies and pass the money on in cash to his son to avoid inheritance tax.

He calls it "forward tax planning".

I'm just wondering is this legal ?

Can a family member hand out 500k in cash to their son without any tax liabilities ?

Fred Swanson

This post has been deleted.

jimmycrackcorm

Dr Brown wrote:

Can a family member hand out 500k in cash to their son without any tax liabilities ?

There's a maximum limit, but with that amount of cash it would be advisable to consult a financial expert.

ANXIOUS

jimmycrackcorm wrote: »

There's a maximum limit, but with that amount of cash it would be advisable to consult a financial expert.

There is a limit per se, but anyone can give anyone €3,000 per year that never goes towards a limit.

So in essences your parents could give you €6k a year every year and have no tax liability or eat into your inheritance limit.

filbert the fox

the disponer can pass on to a son €310,000 tax free throughout their lifetime.

If he resides for a period in the house (?????? 4 years) before the death then there is an exemption but this op's mate does not seem to qualify under this heading.

Robbo

Dr Brown wrote: »

A mate of mine plans to sell his house before he dies and pass the money on in cash to his son to avoid inheritance tax.

He calls it "forward tax planning".

I'm just wondering is this legal ?

Can a family member hand out 500k in cash to their son without any tax liabilities ?

If they dole it out in €3,000 annual instalments over a period of 166 years or so.

The CAT threshold from parent-to-child is €310,000 and will only go up in future.

There are plenty of professional tax planners out there who can advise. Revenue are well aware of most amateur schemes to avoid tax and it would be unwise to embark upon such an endeavour considering the unavoidable paper trail for large parts of this scheme.

my3cents

ANXIOUS wrote: »

There is a limit per se, but anyone can give anyone €3,000 per year that never goes towards a limit.

So in essences your parents could give you €6k a year every year and have no tax liability or eat into your inheritance limit.

filbert the fox wrote: »

the disponer can pass on to a son €310,000 tax free throughout their lifetime.

..

Those posts seem at odds with each other?

Is the 3k included in the 310k?

Robbo

filbert the fox wrote: »

the disponer can pass on to a son €310,000 tax free throughout their lifetime.

If he resides for a period in the house (?????? 4 years) before the death then there is an exemption but this op's mate does not seem to qualify under this heading.

The Dwelling House exemption is heavily scrutinised these days. A lot of expensive piles in swanky parts of Dublin were being passed on in such a manner.

filbert the fox

my3cents wrote: »

Those posts seem at odds with each other?

Is the 3k included in the 310k?

See CAT aggregation rules.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/what-are-group-thresholds-rates-and-aggregation-rules.aspx

the €3k or €6k per annum must aggregate up to the threshold - it's not separate.


BTW the rules are hard to understand in terms of parent child relationship and other relationships.

Say your only son left a property worth €350,000 to an aged mother as the only survivor. She can only inherit from his estate €32,500 tax free leaving a hefty tax bill on the remaining €317,500!

Homer

Of course it’s possible to do but what is the son going to do with all that cash? Soon as he try’s to lodge it revenue will want to know where he got it!

filbert the fox

Dr Brown wrote: »

A mate of mine plans to sell his house before he dies and pass the money on in cash to his son to avoid inheritance tax.

He calls it "forward tax planning".

I'm just wondering is this legal ?

Can a family member hand out 500k in cash to their son without any tax liabilities ?

BTW when is he going to die?

BorneTobyWilde

filbert the fox wrote: »

the disponer can pass on to a son €310,000 tax free throughout their lifetime.

If he resides for a period in the house (?????? 4 years) before the death then there is an exemption but this op's mate does not seem to qualify under this heading.

What does that mean. So if I was to live in parents house for 6 years house could be inherited tax free, even above the 320k threshold ?

NewCorkLad

filbert the fox wrote: »

See CAT aggregation rules.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/what-are-group-thresholds-rates-and-aggregation-rules.aspx

the €3k or €6k per annum must aggregate up to the threshold - it's not separate.


BTW the rules are hard to understand in terms of parent child relationship and other relationships.

Say your only son left a property worth €350,000 to an aged mother as the only survivor. She can only inherit from his estate €32,500 tax free leaving a hefty tax bill on the remaining €317,500!

No the €3,000 gift exemption is separate and doesnt impact the inheritance thresholds.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-exemptions-and-reliefs/small-gift-exemption/index.aspx

BorneTobyWilde

Homer wrote: »

Of course it’s possible to do but what is the son going to do with all that cash? Soon as he try’s to lodge it revenue will want to know where he got it!

They look into peoples banks account now? WTF?

Reati

BorneTobyWilde wrote: »

They look into peoples banks account now? WTF?

Of course. It's a tax at source system. They know how much you get paid and if a large chunk of money appears out of the blue, the banks will tell revenue etc. to ensure it's not proceeds of crime etc

There is no hiding money any more.

Anyway, inheritance tax is an a disgraceful excuse for tax. Should be removed.

Kuva

http://www.independent.co.uk/news/uk/home-news/duke-of-westminster-son-avoids-inheritance-tax-billions-britains-richest-men-family-trusts-rules-a7998246.html


Trusts like this not doable here^^^

Must be.

Dr Brown

Kuva wrote: »

http://www.independent.co.uk/news/uk/home-news/duke-of-westminster-son-avoids-inheritance-tax-billions-britains-richest-men-family-trusts-rules-a7998246.html


Trusts like this not doable here^^^

Must be.

Bob Geldof also avoids inheritance tax.

http://www.dailymail.co.uk/news/article-468444/How-debt-crusader-Geldof-save-1-6m-death-tax.html

Dr Brown

Reati wrote: »

Of course. It's a tax at source system. They know how much you get paid and if a large chunk of money appears out of the blue, the banks will tell revenue etc. to ensure it's not proceeds of crime etc

There is no hiding money any more.

Anyway, inheritance tax is an a disgraceful excuse for tax. Should be removed.

If you keep cash under the mattress revenue etc would have no way of knowing about it.

ANXIOUS

filbert the fox wrote: »

See CAT aggregation rules.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/what-are-group-thresholds-rates-and-aggregation-rules.aspx

the €3k or €6k per annum must aggregate up to the threshold - it's not separate.


BTW the rules are hard to understand in terms of parent child relationship and other relationships.

Say your only son left a property worth €350,000 to an aged mother as the only survivor. She can only inherit from his estate €32,500 tax free leaving a hefty tax bill on the remaining €317,500!

The above is incorrect, the €3k is completely separate to the threshold. It's under the small gift excemption.

Also the dwelling home relief is gone for all intents and purposes unless you're disabled or some other conditions.

In relation to a child leaving his parents an inheritance there are ways around that as well.

trusts and holding companies are about the only way to do this - for the very rich (like Geldof) and super-rich (Dermot Desmond) link

aside from

the 3k euro a year
dwelling house exemptions (although rules have tightened down on this and you have to be living in the house etc beforehand)
the normal €310 k
bona fide family businesses and farms

could pass on the house if conditions met and and then charge the dad to rent-a-room there tax free - €14 k a year exemption on this.

BorneTobyWilde

ANXIOUS wrote: »

The above is incorrect, the €3k is completely separate to the threshold. It's under the small gift excemption.

Also the dwelling home relief is gone for all intents and purposes unless you're disabled or some other conditions.

In relation to a child leaving his parents an inheritance there are ways around that as well.

Gone?
Who would qualify ?
What conditions?

Fred Swanson

This post has been deleted.

filbert the fox

filbert the fox wrote: »

BTW the rules are hard to understand in terms of parent child relationship and other relationships.

Say your only son left a property worth €350,000 to an aged mother as the only survivor. She can only inherit from his estate €32,500 tax free leaving a hefty tax bill on the remaining €317,500!

This is wrong. Parent/Child and Child/Parent are treated the same. OPs best bet is to seek professional advice.

ANXIOUS

BorneTobyWilde wrote: »

Gone?
Who would qualify ?
What conditions?

It's gone from the way it was previously used and abused. Google it and the revenue site is the first one that pops up.

BorneTobyWilde

BorneTobyWilde wrote: »

They look into peoples banks account now? WTF?

Banks and Credit Unions are obliged to report any large deposits to revenue. I’m not sure of the amount.

Homer

Anything above €5k as far as I can recall!

coylemj

Deleted User wrote: »

This is wrong. Parent/Child and Child/Parent are treated the same. OPs best bet is to seek professional advice.

Not according to the Revenue website ....

Group thresholds

You do not have to pay tax on a gift or inheritance if its value is below a particular group tax free threshold. The threshold you use depends on your relationship to the person who gave you the gift or inheritance. You must pay tax on any remaining value above that threshold. There are three group thresholds.

Group A: The person receiving the gift or inheritance is a child of the person giving it. This includes adopted children, step children and some foster children.

Group B: The person receiving the gift or inheritance has a family relationship with the person giving it. This includes a brother, sister, nephew, niece, grandparent, grandchild, a lineal ancestor or a lineal descendant of the person making the gift.

Group C: The person receiving the gift or inheritance has a relationship with the person giving it which is not already covered in Group A or B.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/what-are-group-thresholds-rates-and-aggregation-rules.aspx

According to that, a parent inheriting from a child would fall into Group B (as a 'lineal ancestor') whereas a child obviously falls into Group A.

coylemj

coylemj wrote: »

Not according to the Revenue website ....

Group thresholds

You do not have to pay tax on a gift or inheritance if its value is below a particular group tax free threshold. The threshold you use depends on your relationship to the person who gave you the gift or inheritance. You must pay tax on any remaining value above that threshold. There are three group thresholds.

Group A: The person receiving the gift or inheritance is a child of the person giving it. This includes adopted children, step children and some foster children.

Group B: The person receiving the gift or inheritance has a family relationship with the person giving it. This includes a brother, sister, nephew, niece, grandparent, grandchild, a lineal ancestor or a lineal descendant of the person making the gift.

Group C: The person receiving the gift or inheritance has a relationship with the person giving it which is not already covered in Group A or B.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/what-are-group-thresholds-rates-and-aggregation-rules.aspx

According to that, a parent inheriting from a child would fall into Group B (as a 'lineal ancestor') whereas a child obviously falls into Group A.

This suggests otherwise. http://www.citizensinformation.ie/en/money_and_tax/tax/capital_taxes/capital_acquisitions_tax.html

Dr Brown

Fred Swanson wrote: »

This post has been deleted.

A lot of old people keep their money in the mattress.

filbert the fox

Dr Brown wrote: »

A lot of old people keep their money in the mattress.

how do you define "a lot", "old" and "their money"?

my3cents

Dr Brown wrote: »

A lot of old people keep their money in the mattress.

Tricky when bank notes change and the old ones are no longer accepted.

How do you for example change a mattress load of the old style €50 for the new ones when the old ones eventually get phased out?

https://www.ecb.europa.eu/euro/banknotes/europa/html/index.en.html

The first series of euro banknotes will continue to be issued alongside the Europa series of notes until the remaining stocks have been used up. They will then be gradually phased out.

Dr Brown

my3cents wrote: »

Tricky when bank notes change and the old ones are no longer accepted.

How do you for example change a mattress load of the old style €50 for the new ones when the old ones eventually get phased out?

https://www.ecb.europa.eu/euro/banknotes/europa/html/index.en.html

Banks here will still accept Punts so old Euros should be no problem.

coylemj

Deleted User wrote: »

This suggests otherwise. http://www.citizensinformation.ie/en/money_and_tax/tax/capital_taxes/capital_acquisitions_tax.html

So when it comes to taxation matters, you take the citizen's information website as authoritative - over the Revenue's own website?

OK, let's try again. This time there is no ambiguity and by the way, the webpage quoted below (link provided) was 'published' on Jan 23rd last i.e. 7 days ago.....

CAT thresholds (post November 2011 to date)

Group A: A son or daughter of the person giving the gift or inheritance (the disponer).

Group B: A parent, brother, sister, niece, nephew, grandparent, grandchild, lineal ancestor or a lineal descendant of the disponer.

Group C: People with a relationship to the disponer not already covered in Groups A or B.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-thresholds-post-november-2011.aspx

spyderski

Dr Brown wrote: »

Banks here will still accept Punts so old Euros should be no problem.

No they don’t. But The Central Bank does - if you call in person, fill out a form, and provide photographic ID. Hardly an ideal situation for a tax dodger.

Fred Swanson

This post has been deleted.

Atlantic Dawn

BorneTobyWilde wrote: »

They look into peoples banks account now? WTF?

Not exactly, they will though have reports given to them by bank cashiers reporting to them if you go depositing large amounts of cash, circa €15k in one go, this is part of anti money laundering legislation.

In addition the DIRT reports from each bank account in the country go to Revenue so they will know if the amount of DIRT you are paying matches what someone would have if they had €200k in the bank that odds are you have a balance of €200k in the bank.

Flincher

Fred Swanson wrote: »

The bank of mattress reports to no one.

No, but ex's, former business partners, jealous neighbours, anyone with a grudge can report to Revenue. Folks can come up with the most imaginative ways of evading tax only to be undone by someone telling tales. Then you've a Revenue audit and a bill for multiples of your initial liability.

blindside88

Your friend and his dad should look into a Section 72 life policy. At the minute he can inherit €310,000 from his dad (either gift or inheritance) plus €3000 per year. The Section 72 life policy is effectively a life policy that pays the inheritance tax liability to revenue when the gentleman passes away. There is a cost involved obviously but worth speaking to a financial advisor about

hullaballoo

The mattress thing is tax evasion and is a criminal offence. Funnily enough, the State takes defrauding the exchequer/public purse quite seriously and people tend to get sentences so severe that they remain in the public conscience for a surprising length of time.

That said, inheritance tax is a horrible tax and it's ruthless in this country but of course the people liable for it can't go out rioting etc. because they're too busy working themselves to the bone so that their kids can give 33% of their assets to The People on their death to subsidise their free drinking water that they defecate into.

crossvilla

If the son is married and he trusts his wife he can role that up to €6k per year. The father can also gift close family friends a sum of €3k per year on the premise they will re-gift the money back to his son. The son could also buy a property and pay down the mortgage within a short number of years on a variable rate through re-gifting and other forms of payments.

Fred Swanson

This post has been deleted.

longgonesilver

Fred Swanson wrote: »

This post has been deleted.

Such as, I meant to give you a birthday present every year but kept forgetting, happy 21st birthday, here is 60000 euro tax free;)

Peregrinus

longgonesilver wrote: »

Such as, I meant to give you a birthday present every year but kept forgetting, happy 21st birthday, here is 60000 euro tax free;)

Nope. The taxable event is the giving of the gift, not the meaning to give the gift.

Peregrinus

Deleted User wrote: »

This suggests otherwise. http://www.citizensinformation.ie/en/money_and_tax/tax/capital_taxes/capital_acquisitions_tax.html

coylemj wrote: »

So when it comes to taxation matters, you take the citizen's information website as authoritative - over the Revenue's own website? . . .

I think Maryanne is correct. The group thresholds are dealt with in Capital Acquisitions Tax Consolidation Act 2003 Schedule 2. Para 1 reads as follows:

“group threshold”, in relation to a taxable gift or a taxable inheritance taken on a particular day, means—

(a) €381,000, where—

(i) the donee or successor is on that day the child, or minor child of a deceased child, of the disponer, or

(ii) the successor is on that day a parent of the disponer and—

(I) the interest taken is not a limited interest, and

(II) the inheritance is taken on the death of the disponer;

(b) €38,100, where the donee or successor is on that day, a lineal ancestor, a lineal descendant (other than a child, or a minor child of a deceased child), a brother, a sister, or a child of a brother or of a sister of the disponer;

(c) €19,050, where the donee or successor (who is not a spouse of the disponer) does not, on that day, stand to the disponer in a relationship referred to in subparagraph (a) or (b);

From memory, this is intended to cover the situation which can arise where a person dies young, unexpectedly, leaving no spouse or children, and not having made a will. Their estate will pass to their surviving parents and, typically, a few years later (on the death of the parents) will then pass to other family members, e.g. brothers and sisters of the deceased young person, or more remote relatives. The inclusion of para (a)(ii) above prevents it from being subjected to inheritance tax at low thresholds twice in a short number of years.

filbert the fox

Reati wrote: »

Of course. It's a tax at source system. They know how much you get paid and if a large chunk of money appears out of the blue, the banks will tell revenue etc. to ensure it's not proceeds of crime etc

There is no hiding money any more.

Anyway, inheritance tax is an a disgraceful excuse for tax. Should be removed.

Removed for everyone except business!

coylemj

Peregrinus wrote: »

I think Maryanne is correct...... ...

From memory, this is intended to cover the situation which can arise where a person dies young, unexpectedly, leaving no spouse or children, and not having made a will. Their estate will pass to their surviving parents and, typically, a few years later (on the death of the parents) will then pass to other family members, e.g. brothers and sisters of the deceased young person, or more remote relatives. The inclusion of para (a)(ii) above prevents it from being subjected to inheritance tax at low thresholds twice in a short number of years.

Thanks for clearing that up. The revenue used to have information sheets (one or two page PDFs) giving full details on this type of topic, now it's just paragraphs of text scattered all over the place, sometime giving conflicting info.

Maryanne, you were right!

Metric Tensor

filbert the fox wrote: »

Removed for everyone except business!

So a sole trader spends his entire life building up his carpentry business and after school his son joins the trade and works himself to the bone 7 days a week for 20 years but when the Dad dies you want the state to take 30% of the second generation carpenter's livelihood?!

Or have I misunderstood your post?

filbert the fox

Metric Tensor wrote: »

So a sole trader spends his entire life building up his carpentry business and after school his son joins the trade and works himself to the bone 7 days a week for 20 years but when the Dad dies you want the state to take 30% of the second generation carpenter's livelihood?!

Or have I misunderstood your post?

I was really thinking of the unfairness where a billion euro inheritance in business is permitted whereas a single child may have to pay 33% on inheriting the family home (over the threshold of course).
No disrespect to carpenters or other trades.

Dave147

I'm actually just flabbergasted inheritance tax is a thing, **** this country.

Peregrinus

Dave147 wrote: »

I'm actually just flabbergasted inheritance tax is a thing, **** this country.

Inheritance tax is a thing in a lot of countries.

Victor

Metric Tensor wrote: »

So a sole trader spends his entire life building up his carpentry business and after school his son joins the trade and works himself to the bone 7 days a week for 20 years but when the Dad dies you want the state to take 30% of the second generation carpenter's livelihood?!

Let's be honest here, it would be 30% after the first €500,000 of so, if it is a qualifying business. If it isn't a qualifying business, it would be 30% after the first €300,000 of so. Precious few carpenters would have a business that size, although retailers or some other small businesses might, as they are carrying stock or have property.

Metric Tensor wrote: »

when the Dad dies you want the state to take 30% of the second generation carpenter's livelihood?!

But you will happily take 52% of his wages? If you abolish the 30%, the 52% will have to go up.

Dave147 wrote: »

I'm actually just flabbergasted inheritance tax is a thing, **** this country.

You mean you pay a lower rate of tax on money you didn't earn?