Inherited Inheritance tax

john_doe.

Hi

I was wondering what happens in following scenario

A house is left to non relative (John) in 2013 , value 230k.John is executor of deceased estate.

Before probate is granted John himself passes away in 2014 and leaves the house and his own house(value 50k)to his son Alan. Alan is now executor.

I'm guessing Alan needs to pay the original Inheritance tax owed?

Approx €70k.

Also what year is the tax calculated , is it the tax rates in 2013 and the property valuation then or the tax rates when Alan Inherites both properties ?

Spark Plug

Capital Acquisitions Tax for the late John would be based on the Market Value of the house in 2013 the date of death of disposer.

john_doe.

Spark Plug wrote: »

Capital Acquisitions Tax for the late John would be based on the Market Value of the house in 2013 the date of death of disposer.

Thanks i understand this part but given John didn't pay the capital acquisition tax as property was still in probate, what rate does Alan pay at ?

Does he cover the original capital acquisition tax ?

Spark Plug

Capital Acquisitions Tax is charged at 33% on gifts or inheritances made on or after 5 December 2012. Since the original disponer died in 2013 the rate payable by John's estate and Alan is 33%. John's estate will cover the CAT that due in 2013. Alan will pay CAT on the inheritance from John - remember Alan has the benefit of Group A threshold whereas John only had a Group C threshold when he inherited the house in 2013 . The Group C threshold in 2013 was €15,075 (applicable for gift/inheritances from 6 December 2012 to 13 October 2015). Alan's Group A threshold today is €310,000 (full available provided Alan's has not received any gift from his father greater than annual small gift exemption over his lifetime).

john_doe.

Spark Plug wrote: »

Capital Acquisitions Tax is charged at 33% on gifts or inheritances made on or after 5 December 2012. Since the original disponer died in 2013 the rate payable by John's estate and Alan is 33%. John's estate will cover the CAT that due in 2013. Alan will pay CAT on the inheritance from John - remember Alan has the benefit of Group A threshold whereas John only had a Group C threshold when he inherited the house in 2013 . The Group C threshold in 2013 was €15,075 (applicable for gift/inheritances from 6 December 2012 to 13 October 2015). Alan's Group A threshold today is €310,000 (full available provided Alan's has not received any gift from his father greater than annual small gift exemption over his lifetime).

Okay.
So the 33% Tax is owing on John Estate.

Given Alan is the sole beneficiary of John's Estate and executor I guess he needs to pay that CAT owing on the estate and pay any inheritance tax he would then inherit. Given the value of John Estate is less than 310,000 I guess he does not need to pay inheritance tax himself(assuming nothing else received in lifetime)

He is left with the 33%CAT owing on the estate only.

Is it 33% on the valuation of the property in 2013 I.e 33% of 230,000 or did the group C threshold apply to John I.e it's 33% of (230,000 - 15,075)

Thanks

Spark Plug

Correct the latent CAT liability on John's estate is (€230,000 - €15,075) * 33%.

john_doe.

Spark Plug wrote: »

Correct the latent CAT liability on John's estate is (€230,000 - €15,075) * 33%.

is the valuation of the property based on when the original owner died?
i.e John gets gifted in 2013 however probate is never taken out on that estate.

beauf

I assume....

The estate had to settle all debts before any of it is inherited. So...

The valuation for what John and his estate owed is from when the original owner died. The estate has to settle that first.

That done then the property is valued for Alans tax liabilities from when John died.

I assume if you don't do it that way the tax office could come back later looking for the difference and claim interest and fines on it.

Spark Plug

Section 30(4) CATCA 2003 provides that the valuation date of inheritances other than those in Section 30(2) & (3) is the date of delivery or payment to the beneficiary of the inheritance or else the date of its retainer on the beneficiary's behalf, whichever is earlier

"Retainer" is the act of identifying the benefit to be taken by the successor (even if there are legal technicalties to be completed before actual delivery of the benefit). For example the date of Grant of Representation or Grant of Probate/Grant of Administration is frequently taken as the appropriate valuation date for the benefit of the residual of an estate. In the absence of a Grant of Probate then the date is the market value on the date of death of the original owner for John's CAT liability.



http://www.irishstatutebook.ie/eli/2003/act/1/section/30/enacted/en/html

britie

CGT on inherited Property query