Inheritance/CGT Question

Mumha

Apologies if this appears convoluted. It concerns by brother in law (BIL)

His father (his mother died before that) died some years ago, and left the vast majority of his estate (house and land) to the eldest son (4 other siblings got about 10k each).

Two years after that, the eldest son died. Not only did he not make a will, but as executor of his father's will, be did bugger all about it and never sent it to probate. Typical bachelor farmer, didn't trust the government etc.

Anyway, at the moment, the family solicitor is working his way through the father's probate process before he can get to splitting up the eldest brother's estate between the remaining 4 siblings.

Now, the estate will be worth a modest 400K or so, and since the 4 will be inheriting about 100k each from their brother, they will be caught in CAT threshold B which has a limit of €32K. He knows that and that's fine.

The question arises as follows

The remaining 4 have agreed how the estate should be split. There's cash, land and a cottage/house. My BIL is going to take a parcel of land and the cottage (to subsequently do it up), and that would roughly come to the 100K due to him. He knows he will be paying 22k in CAT.

He could buy the cottage outright from the estate now, with his own cash ?
If he bought it now, AND if he didn't pay full market price, he would be caught for extra tax ?

If he took over the house now, and got the market value from 3 valuations...let's say 70K. And that would be taken from his inheritance. Is there an issue with this ?

Mr. Incognito

Speak to a tax advisor and/ or solicitor who has tax knowledge- they will tell you quickly if they dont

This is complex tax advice which you should not be seeking off the internet. Its akin to seeking a medical diagnosis online- dont do it.

Mumha

Mr. Incognito wrote: »

Speak to a tax advisor and/ or solicitor who has tax knowledge- they will tell you quickly if they dont

This is complex tax advice which you should not be seeking off the internet. Its akin to seeking a medical diagnosis online- dont do it.

You're right, and I had already advised them similarly, but was wondering myself if there were obvious things in what I wrote. Thanks anyway.

Squatter

I'm not a lawyer, but I don't think that the house can be sold before Letters of Administration have been obtained.

Mumha

Squatter wrote: »

I'm not a lawyer, but I don't think that the house can be sold before Letters of Administration have been obtained.

Good point. I understand his wanting to get on with doing the house up, but just letting it all play out would make more sense.

Peregrinus

Case 1: Buys the cottage for full value - say 100k

The estate loses a cottage worth 100k but gains 100k in cash. Total value of the estate is unchanged. Value of share inherited by your BIL is unchanged. His inheritance tax bill is unchanged.

Case 2: Buys the cottage for 60k. Effectively he gets a 40k share in the house for free.

Value of the estate goes down by 40k (loses 100k house, gains 40k cash). Each heir's share of the estate is correspondingly diminished. Are they happy about this? They're all at a loss.

Assume they are happy - they are feeling generous. Everybody's inheritance is slightly diminished - if there are 4 heirs, each share goes down by 10k with proportionate reduction in CAT bill.

However, as well as his inheritance, BIL is receiving a gift worth 30k from his three brothers (10k from each brother), and he needs to declare this and pay CAT on it.