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