Inheritance tax burden reduction

monsterdev

Guys,

My aunt has recently become ill and has informed me that she wishes to leave me her estate. I am extremely flattered but also worried on the tax burden I may encompass. Is there any kind of insurance or strategies that I can take to reduce the hefty fees, if I am:

A) to keep the property
to sell

splinter65

monsterdev wrote: »

Guys,

My aunt has recently become ill and has informed me that she wishes to leave me her estate. I am extremely flattered but also worried on the tax burden I may encompass. Is there any kind of insurance or strategies that I can take to reduce the hefty fees, if I am:

A) to keep the property
to sell

No, in a nutshell. €32500 is your cap and you will be paying 33c on the € on any amount above that irregardless of wether you keep the house or sell it .

hullaballoo

If you have received any other gifts in the same category, your threshold will be reduced by the amount of the prior gift.

There may be enough in the estate to discharge the tax liability without selling the house if she is wealthy. It's a bit of a guessing game until the estate can be valued tbh but whoever is administering it should be able to tell you what's involved.

Homer

Surely the tax burden would only be an issue if you don’t want to sell the property. If you decide to sell the tax burden would be covered by the proceeds of the sale.

stickman1019

Do you have a husband or wife as they could also be gifted up to €16500 tax free

coylemj

Homer wrote: »

Surely the tax burden would only be an issue if you don’t want to sell the property. If you decide to sell the tax burden would be covered by the proceeds of the sale.

You're correct but that's not the way people look at it. All the OP can see is the CAT bill, not the assets he will acquire.

OP, the 'categories' that poster hullabaloo refers to above are the three categories of people who may leave you bequests, they are treated separately and have different exemption thresholds....

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.

If your aunt leaves you assets then it will fall into Group B above which has a current exemption threshold of €32,500. However if you previously received a bequest from a relation in that category, you may have used up some or all of the Group B threshold which applies over your entire life, not simply to each bequest.

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

NinjaTruncs

Your aunt could also give you 3,000 per year without you needing to pay any tax, if she has cash to leave that could all be left in this manner before she passed. If you have a husband or children she could leave 3K to each of them also.

You'd be best to seek professional advise and they can assess her complete estate and advice you on ways to reduce you tax as much as possible.

Losty Dublin

OP, there are both solicitors and accountants out there who specialise in easing such potential liabilities. Your aunt could do worse than to approach one early on and to see what can be done.

RayCun

Homer wrote: »

Surely the tax burden would only be an issue if you don’t want to sell the property. If you decide to sell the tax burden would be covered by the proceeds of the sale.

Yes, either you are getting a house for a lot less than market value, or you are getting most of the value of a house in cash.

Neither is a 'burden'.

Pkiernan

monsterdev wrote: »

Guys,

My aunt has recently become ill and has informed me that she wishes to leave me her estate. I am extremely flattered but also worried on the tax burden I may encompass. Is there any kind of insurance or strategies that I can take to reduce the hefty fees, if I am:

A) to keep the property
to sell

Inheritance tax insurance is available in Ireland.
Many Irish banks offer this service. You and your aunt should make an appointment together for estate planning advice.

Monife

Pkiernan wrote: »

Inheritance tax insurance is available in Ireland.
Many Irish banks offer this service. You and your aunt should make an appointment together for estate planning advice.

It is called a Section 72 life assurance policy and there are a number of conditions attached to it including:

• The policy must carry life cover of at least 8 annual premiums or 6 annual premiums (if the policy is loaded because of the life assured's health), and
• The person who owns the estate that will give rise to the inheritance tax liability must be the policyholder and pay the premiums.

So this may not be an option if your aunt is in serious ill health.

Another option - if you lived with your aunt for at least 3 years prior to her death and do not own a house of your own (and continue to occupy the house for 6 years after you inherit the property), you may be able to receive the property without an inheritance tax liability.

Edgware

Inheritance tax is a very big issue with politicians at the moment as their constituents are being hammered. The value of property and smaller families means that the thresholds are easily reached and then you are hit with a 33% rate. There may be an increase in thresholds in the Budget next month but inheritance tax is a nice little earner for the taxman

beauf

Thats 33% after the fair deal has taken 22%

coylemj

Edgware wrote: »

Inheritance tax is a very big issue with politicians at the moment as their constituents are being hammered.

That sounds like wishful thinking. What is hammering people (in far greater numbers than CAT) is the USC and the low threshold where you start paying 40% PAYE.

Edgware wrote: »

The value of property and smaller families means that the thresholds are easily reached and then you are hit with a 33% rate. There may be an increase in thresholds in the Budget next month but inheritance tax is a nice little earner for the taxman

I can see how an only child will be hit but the €310,000 threshold for children means that (e.g.) a brother and sister can between them inherit a house worth €620,000 and not pay a cent in CAT.

On a house worth one million euros, each of them will pay CAT of €62,700 which is an effective tax rate of just 13% of the €500,000 asset each will inherit - hardly penal.

I can't agree that this is a pressing issue that needs to be urgently addressed. It affects families with significant capital assets which is a relatively small % of the population.

RayCun

coylemj wrote: »

I can see how an only child will be hit but the €310,000 threshold for children means that (e.g.) a brother and sister can between them inherit a house worth €620,000 and not pay a cent in CAT.

On a house worth one million euros, each of them will pay CAT of €62,700 which is an effective tax rate of just 13% of the €500,000 asset each will inherit - hardly penal.

In your first example, the only child is getting a house worth 620,000 at a cost of 100,000 euro.

This always gets into "How come he didn't have to pay tax when he inherited a house (in Jobstown), but when I inherit a house (on Shrewsbury Road) I have to pay tax? So unfair!" territory.

coylemj

RayCun wrote: »

In your first example, the only child is getting a house worth 620,000 at a cost of 100,000 euro.

This always gets into "How come he didn't have to pay tax when he inherited a house (in Jobstown), but when I inherit a house (on Shrewsbury Road) I have to pay tax? So unfair!" territory.

+1 as I said in post #6 above, all the average person can see is the CAT bill, not the asset they are inheriting.

Edgware

coylemj wrote: »

That sounds like wishful thinking. What is hammering people (in far greater numbers than CAT) is the USC and the low threshold where you start paying 40% PAYE.



I can see how an only child will be hit but the €310,000 threshold for children means that (e.g.) a brother and sister can between them inherit a house worth €620,000 and not pay a cent in CAT.

On a house worth one million euros, each of them will pay CAT of €62,700 which is an effective tax rate of just 13% of the €500,000 asset each will inherit - hardly penal.

I can't agree that this is a pressing issue that needs to be urgently addressed. It affects families with significant capital assets which is a relatively small % of the population.

Usually Fine Gael voters

Mod
ott comment. Pls be civil here

StupidLikeAFox

Well here is an outlandish suggestion for you.

Fly to a place called Nevis. Its a tax haven. Have somebody set up a company there and have that company buy the house from your Aunt. Have your Aunt pay this company back in rent using the proceeds of the sale. Once that is paid back your Nevis company will own the house and you can rent it off them after your aunt passes. Then you the person who owns the company can collect the rent off you. In Nevis foreigners don't pay taxes, nobody is allowed access to company ownership records and if somebody wants to sue a company in Nevis they have to go there and post a $25k bond for the privilege

Bear in mind I have no idea how legal this is or the cost involved but I just read an article on how the rich and famous do it recently:
https://www.theguardian.com/news/2018/jul/12/nevis-how-the-worlds-most-secretive-offshore-haven-refuses-to-clean-up

beauf

I guess many people can see the tax on the wages that bought the house, maintained it, then is taxed again on passing it on again.
Some will say those inheriting didn't do any of that. But most families are heavily involved with their parents day to day and the family home over their entire lifetime.
Others will say you shouldn't be able to inherit anything.

coylemj

beauf wrote: »

I guess many people can see the tax on the wages that bought the house, maintained it, then is taxed again on passing it on again.

The way society sees it is that the people who paid taxes along the way and bought the house are now dead and there is no reason why their descendants should inherit their estate free of tax.

It's called unearned income and it's hard to argue against some form of tax being levied on it. CAT is a very watered down version of wealth distribution.

tretorn

Hang on a minute.

If I give a sibling 32,000 which is tax free does this mean another sibling cant give her anything except an annual gift tax of 3000 euros before the gift tax kicks in.

We removed one sibling from the residue of my fathers estate so she wouldnt be caught for gift tax. There are shares in the estate worth a lot of money and I thought three siblings could give the other sibling 32,000 from each of them.

Does this mean we have to someone give her cash to avoid her paying gift tax.

We are already paying almost five thousand a month for nursing home care and didnt do the Fairdeal scheme.

beauf

coylemj wrote: »

The way society sees it is that the people who paid taxes along the way and bought the house are now dead and there is no reason why their descendants should inherit their estate free of tax.

It's called unearned income and it's hard to argue against some form of tax being levied on it. CAT is a very watered down version of wealth distribution.

I think people would less of an issue with that tax if the state delivered better services, especially for the elderly.

https://taxfoundation.org/estate-and-inheritance-taxes-around-world/

beauf

tretorn wrote: »

Hang on a minute.

If I give a sibling 32,000 which is tax free does this mean another sibling cant give her anything except an annual gift tax of 3000 euros before the gift tax kicks in.

We removed one sibling from the residue of my fathers estate so she wouldnt be caught for gift tax. There are shares in the estate worth a lot of money and I thought three siblings could give the other sibling 32,000 from each of them.

Does this mean we have to someone give her cash to avoid her paying gift tax.

We are already paying almost five thousand a month for nursing home care and didnt do the Fairdeal scheme.

I think you have to realise there is no way of avoiding the tax. It might be the form of fairdeal or some other way.

august12

Each sibling can give 3000 annually and if they are married, their spouse can also gift 3000 annually, so 3 X 2 X 3000 = 18000 potential gift annually, I think, without affecting the CAT threshold. The limit is as you stated above from all parties within that group.
With regard to the nursing home fees, if you are paying the fees or a number of your family are splitting the bill and paying a portion each and on the higher tax rate, you can recoup 40% of these fees annually. In other words, to gain the most benefit, the person or persons paying the fee should have paid the higher rate of tax on a good portion of their income in order to recoup as much as possible of the NH fee.

NinjaTruncs

Can one person receive 3000 from multiple people in a year and not pay and CGT on it?

august12

NinjaTruncs wrote:

Can one person receive 3000 from multiple people in a year and not pay and CGT on it?

That's my understanding of it and it doesn't affect the tax free threshold, so both parents can gift 3000 each per year and this will not count towards the 310,000 parent to child, anything in excess of the 3000 will though, and this can be done each year, gifts can be received from other people as well.

Dick Pickle

monsterdev wrote: »

Guys,

My aunt has recently become ill and has informed me that she wishes to leave me her estate. I am extremely flattered but also worried on the tax burden I may encompass. Is there any kind of insurance or strategies that I can take to reduce the hefty fees, if I am:

A) to keep the property
to sell

Just pay your fair share and don’t weasel out of your societal responsibilities

Mod
No preaching pls

Edgware

It is unearned income and it is a "problem" for some though a good "problem" to have.
From a Dublin viewpoint the average 4 bed would be between 400000 and 500000. This may be the total estate plus some cash assets. If left to two or more there wont of the family there wont be any liability anyway. I suppose people dont like the idea of paying tax but if a parent wants to leave me 310000 (fat chance!) I wont mind paying 33% of anything above that

beauf

Dick Pickle wrote: »

Just pay your fair share (Over and over) and don’t weasel out of your societal responsibilities

Fixed that for you.

splinter65

beauf wrote: »

Fixed that for you.

What do you think revenue do with the money they gather in taxes? Can you not see that inheritance tax is one way of spreading the wealth around?

Edgware

splinter65 wrote: »

What do you think revenue do with the money they gather in taxes? Can you not see that inheritance tax is one way of spreading the wealth around?

People dont mind if it helps genuine cases but when it goes to spongers like Ms Cash you cant blame them from not wanting to pay

coylemj

Edgware wrote: »

People dont mind if it helps genuine cases but when it goes to spongers like Ms Cash you cant blame them from not wanting to pay

Pointing at specific waste or instances where public money is spent on people who don't deserve it is a pretty weak excuse for 'not wanting to pay'.

It's simply a cover story for 'I dont want to pay any tax'

Edgware

coylemj wrote: »

Pointing at specific waste or instances where public money is spent on people who don't deserve it is a pretty weak excuse for 'not wanting to pay'.

It's simply a cover story for 'I dont want to pay any tax'

Rubbish. If we got the services promised for our high taxes we wouldn't mind paying but when it goes to leeches of course we don't want to pay

Sleeper12

Edgware wrote:

Inheritance tax is a very big issue with politicians at the moment as their constituents are being hammered. The value of property and smaller families means that the thresholds are easily reached and then you are hit with a 33% rate. There may be an increase in thresholds in the Budget next month but inheritance tax is a nice little earner for the taxman

I can't see any big change in inheritance from aunt tbh. Any sizeable change I'd imagine being parent to child.

I'm wondering if op moved into his aunts house and lived there for a number of years would it be possible considered the family home in the same way as living in the parents house for a number of years makes it the family home as far as inheritance tax is concerned?

splinter65

Edgware wrote: »

People dont mind if it helps genuine cases but when it goes to spongers like Ms Cash you cant blame them from not wanting to pay

Irish people want great housing/schools/hospital/roads/Gardai etc but they don’t want to pay any tax.
If you ask the moaners who they think should pay for these things they nominate Denis o’Brien And Michael O’Leary and Ben Dunne and of course Apple.
The SW budget alone is 22 billion but they somehow go deaf when you say this.
There are spongers and freeloaders in every society. If you try to avoid financially contributing to the country then that makes you as bad as them.

august12

I totally agree, there is so much money wasted in this country, we are told over and over again how tight budgets are but it amazes me how money miraculously appears for elections/referendums/state visits, think in in Farmleigh estate, etc. There is no shortage of money in this country for some people but when vulnerable people in society look for help, the same old crap recording is played over and over, no money for these deserving people, and I'm referring to special needs, disabled and carers when I mention the vulnerable and not the leeches who are out sucking every penny they can possibly get with no intention of ever giving back anything to society. And I won't start on the waste in the Public Sector and I speak from experience here as I witness it first hand.

PS I don't blame anyone who is trying to limit paying inheritance tax to our Government, you can be damn sure about 99% of it is wasted between consultants, advisers, Public servants travel expenses etc, there isn't much left for services.

splinter65

Sleeper12 wrote: »

I can't see any big change in inheritance from aunt tbh. Any sizeable change I'd imagine being parent to child.

I'm wondering if op moved into his aunts house and lived there for a number of years would it be possible considered the family home in the same way as living in the parents house for a number of years makes it the family home as far as inheritance tax is concerned?

There’s no mention of “the family home” in inheritance tax law. It doesn’t matter who is living in the “family home” or how long you’ve been living there.
If it’s willed to you and your not a child of the dead person then you’ll have a cap of either €32500 or €16500 and pay 33c on the € on any amount over that.

Sleeper12

splinter65 wrote:

There’s no mention of “the family home†in inheritance tax law. It doesn’t matter who is living in the “family home†or how long you’ve been living there. If it’s willed to you and your not a child of the dead person then you’ll have a cap of either €32500 or €16500 and pay 33c on the € on any amount over that.

If you are an adult living with your parents and you inherit the family home then Dwelling House Relief comes into play you are not hit by inheritance tax so long as you don't own a home yourself. I was wondering if living with an elderly aunt would qualify you for the Dwelling House Relief or does it have to be a parent?

EDIT: https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-exemptions/exemption-for-dwelling-house/index.aspx

Spanish Eyes

Farmers and business people can leave their millions to anyone with a 90%reductiion in the capital value of same (provided the beneficiiary qualifies) for inheritance (and gift) tax purposes.

I understand the reasoning behind it, to keep farms and businesses going.

But woe betide you if you inherit a house and don’t qualify for dwelling house exemption.

Take note!

hullaballoo

splinter65 wrote: »

There’s no mention of “the family home” in inheritance tax law. It doesn’t matter who is living in the “family home” or how long you’ve been living there.
If it’s willed to you and your not a child of the dead person then you’ll have a cap of either €32500 or €16500 and pay 33c on the € on any amount over that.

That's not true: http://www.irishstatutebook.ie/eli/2003/act/1/section/86/enacted/en/html

Notwithstanding the above, I don't think the OP will be able to rely on a s. 86 exemption either way.

CAT is a horrible, unfair tax but because it only has an effect on people regarded as well off, the populist agenda favours keeping it in place and in particular to ensure people from wealthy backgrounds lose their shirts if they want to keep the home they grew up in.

Spanish Eyes

The only reason I think CAT is unfair is if you are the beneficiary of a farmer or a private business you can avail of AG or Business Relief.

That does not apply to a family home unless you have lived there for the required number of years and do not own any other home.

banie01

hullaballoo wrote: »

That's not true: http://www.irishstatutebook.ie/eli/2003/act/1/section/86/enacted/en/html

Notwithstanding the above, I don't think the OP will be able to rely on a s. 86 exemption either way.

CAT is a horrible, unfair tax but because it only has an effect on people regarded as well off, the populist agenda favours keeping it in place and in particular to ensure people from wealthy backgrounds lose their shirts if they want to keep the home they grew up in.

From painful experience an s.86 exemption is exceedingly difficult to get Revenue's agreement to.

beauf

splinter65 wrote: »

Irish people want great housing/schools/hospital/roads/Gardai etc but they don’t want to pay any tax.
..... If you try to avoid financially contributing to the country then that makes you as bad as them.

People pay tax all their lives, they the end of their lives, they end up spending days on a trolley in ER when they are sick. They pay health insurance all their lives. They go into a nursing home, and its as if you never paid a cent. So you pay 22% of the value or your house, or 2k+ a week as if you never paid tax a day in your life. Then if you want leave you kids something, again its like you never paid tax and you pay yet again, to give your money to your kids.

Then someone comes along and tell you after a lifetime of working you've not contributed to the country.

If there's an incentive to pay inheritance tax I'm not seeing it.

Sleeper12

banie01 wrote:

From painful experience an s.86 exemption is exceedingly difficult to get Revenue's agreement to.

It's much easier since the 2016 ammendments. It's very straightforward now and I'm pretty sure since 2016 it doesn't even have to be a parent. It has to be your main residence for six years after you inherit it though

beauf

If you did want to move back into your family home after its left to you. You'd pay tax both on inheriting, or buying the family home and selling the home you live in currently.

How someone can say you don't pay tax or enough tax baffles me.

august12

beauf wrote:

If you did want to move back into your family home after its left to you. You'd pay tax both on inheriting, or buying the family home and selling the home you live in currently.

There is no GCT on sale of your principle private residence as long as the conditions are met i.e. living there for x amount of years prior to sale.

beauf

People better to inherit to schedule so...

RayCun

hullaballoo wrote: »

That's not true: http://www.irishstatutebook.ie/eli/2003/act/1/section/86/enacted/en/html

Notwithstanding the above, I don't think the OP will be able to rely on a s. 86 exemption either way.

CAT is a horrible, unfair tax but because it only has an effect on people regarded as well off, the populist agenda favours keeping it in place and in particular to ensure people from wealthy backgrounds lose their shirts if they want to keep the home they grew up in.

Suppose I was an only child from a wealthy background.
My parents die and leave me the home I grew up in, which is worth a million euro.
I now have a choice between selling the house and walking away with over half a million euro I didn't lift a finger to earn, or taking out a mortgage to pay for a house that is worth much, more than I have to borrow to pay for it.