CAT never paid and subsequent inheritance

Heisenburg81

If an individual inherited property circa six years ago, was liable to pay CAT but never did, and now they themselves are deceased and have left same property in their will.
The new beneficiaries will discharge any CAT on this new inheritance.
What recourse have Revenue if any to recover the CAT that the current deceased was liable for but never returned?

Peregrinus

Unpaid tax liabilities are a charge on the estate, so the executor needs to sort this out, and pay the tax and any interest or penalties, before he distributes the property to the beneficiaries. This may of course result in a reduced amount going to the beneficiaries, which will reduce the CAT for which they are liable.

Calahonda52

Peregrinus wrote: »

Unpaid tax liabilities are a charge on the estate, so the executor needs to sort this out, and pay the tax and any interest or penalties, before he distributes the property to the beneficiaries. This may of course result in a reduced amount going to the beneficiaries, which will reduce the CAT for which they are liable.

or end up with a net loss to the state if the arrears/interest penalties are large enough:
https://www.revenue.ie/en/gains-gifts-and-inheritance/gift-and-inheritance-tax-cat/what-charges-are-there-for-late-filing.aspx

Heisenburg81

Peregrinus wrote: »

Unpaid tax liabilities are a charge on the estate, so the executor needs to sort this out, and pay the tax and any interest or penalties, before he distributes the property to the beneficiaries. This may of course result in a reduced amount going to the beneficiaries, which will reduce the CAT for which they are liable.

But what if the property has been sold to third parties for example?
If new beneficiaries paid their CAT and subsequently sold assets.
Original deceased disponer never paid taxes.
Can there be recourse in this case on the beneficiaries after all estates wound up?

Peregrinus

Heisenburg81 wrote: »

But what if the property has been sold to third parties for example?
If new beneficiaries paid their CAT and subsequently sold assets.
Original deceased disponer never paid taxes.
Can there be recourse in this case on the beneficiaries after all estates wound up?

We're talking about CAT here. The orginal deceased disponer had no CAT liablity; the liablity only arose when he died.

Simple facts: A dies, leaving the property to B. B has a CAT liability on the inheritance, doesn't pay it. B dies, leaving the property to C.

The executor of B's estate needs to settle B's outstanding CAT liability before distributing assets to C. Depending on how much cash is in the estate it may be necessary to sell the property to pay the tax liabilities, in which case C only gets what's left of the cash after that is done. Wherther C gets the property or an amount of cash, he has his own CAT liability which he now has to settle, based on the value of what he has got.

If the executor of B's estate fails to settle the tax liabilities and just distributes all the assets to C and the others entitled, he's in trouble. The executor's job is to identify the liabilities of the estate and settle them before distributing the assets; he hasn't done that. The revenue, when the matter comes to light, may chase him as well as the property for the unpaid tax, interest and penalties. It will be no defence for him to say that he has already given the property to somebody else; he shouldn't have done that while B's tax bill remained unpaid.

You ask "what happens if the property has been sold?" In fact purchasers will normally check that a property doesn't have any outstanding CAT liablities attached to it, so the matter should have been addressed then. But if it wasn't, B still owed the tax, and it was still a liability of his estate, and his executor should have settled it before distributing the estate. So the Revenue will chase the executor.

Heisenburg81

Peregrinus wrote: »

We're talking about CAT here. The orginal deceased disponer had no CAT liablity; the liablity only arose when he died.

Simple facts: A dies, leaving the property to B. B has a CAT liability on the inheritance, doesn't pay it. B dies, leaving the property to C.

The executor of B's estate needs to settle B's outstanding CAT liability before distributing assets to C. Depending on how much cash is in the estate it may be necessary to sell the property to pay the tax liabilities, in which case C only gets what's left of the cash after that is done. Wherther C gets the property or an amount of cash, he has his own CAT liability which he now has to settle, based on the value of what he has got.

If the executor of B's estate fails to settle the tax liabilities and just distributes all the assets to C and the others entitled, he's in trouble. The executor's job is to identify the liabilities of the estate and settle them before distributing the assets; he hasn't done that. The revenue, when the matter comes to light, may chase him as well as the property for the unpaid tax, interest and penalties. It will be no defence for him to say that he has already given the property to somebody else; he shouldn't have done that while B's tax bill remained unpaid.

You ask "what happens if the property has been sold?" In fact purchasers will normally check that a property doesn't have any outstanding CAT liablities attached to it, so the matter should have been addressed then. But if it wasn't, B still owed the tax, and it was still a liability of his estate, and his executor should have settled it before distributing the estate. So the Revenue will chase the executor.

Thanks for that.