Date of grant of probate for CAT liability

Baby01032012

Hi all,

Both my parents died towards the end of 2019. My mum died first and all of her estate went to my dad under her Will. My dad's Will names me as the Executor and main beneficiary.

While I am in the fortunate position of receiving a large inheritance. I'm daunted by the large CAT liability i will owe to Revenue. There is very little cash in the estate. Most of the inheritance is in the form of property.

I note the date of grant of probate will be the basis for when the liability is due. I was hoping that the grant of probate could be 1 September or after so that the due date for CAT could be 31 October 2021 not this year. However the solicitor looking after Probate has advised that they work off the date of death and that any way Probate will not take very long and i should look at 31 October this year as when the CAT should be paid.

Am i wrong in trying to buy myself more time. I will pay the liability however it is a large 6 figure sum I need to either sell property or mortgage etc.

Marcusm

Are you already in receipt of the property, e.g. living there when they died. If yes, then the date of your father’s date may be the valuation date. If not, has there been a grant of probate? It could not be the date of death as the various actions needed to have been taken to obtain the grant of probate (if I remember all this correctly(.

tricky D

Talk to Revenue. They are reasonable and if you have not received any monies so obviously can't pay, you should be able to avoid penalties and interest so long as they are aware of the situation. Not sure how long probate takes these days, we flagged property matters which apparently sped the process up.

Baby01032012

Marcusm wrote: »

Are you already in receipt of the property, e.g. living there when they died. If yes, then the date of your father’s date may be the valuation date. If not, has there been a grant of probate? It could not be the date of death as the various actions needed to have been taken to obtain the grant of probate (if I remember all this correctly(.

No, solicitor has just started the process but believes it will take 2-3months. I was not living in any of the properties. There are a number of properties here plus one abroad which was covered in the Irish will but no foreign will.

Baby01032012

tricky D wrote: »

Talk to Revenue. They are reasonable and if you have not received any monies so obviously can't pay, you should be able to avoid penalties and interest so long as they are aware of the situation. Not sure how long probate takes these days, we flagged property matters which apparently sped the process up.

I just thought if solicitor delayed it until 1 September this would be a legitimate way to delay the CAT liability until next year. However solicitor disagrees.

It’s a 700000+ liability. I know I have 9 months nearly until it’s due but I’d like more time if possible to maybe raise money or get my finances in order. I’d hate to have to sell just to pay the liability.

Revenue will charge 8% interest and nearly 10% in penalties if I was to delay paying for a year that’s another 120,000 onto the liability.

Calahonda52

Have you looked at the issues re your exposure for the foreign property: it can be a mess, requiring any tax liability be paid before you can sell the property

Baby01032012

Calahonda52 wrote: »

Have you looked at the issues re your exposure for the foreign property: it can be a mess, requiring any tax liability be paid before you can sell the property

No, solicitor in Spain requires grant of probate here first. I wasn’t going to sell the foreign property. Thanks I’ll have to consider what tax is due there and when I guess.

Calahonda52

Baby01032012 wrote: »

No, solicitor in Spain requires grant of probate here first. I wasn’t going to sell the foreign property. Thanks I’ll have to consider what tax is due there and when I guess.

Spain!
I had one there as well and the advice there was that there is no free transfer of assets between spouses so your Mums estate may have a tax liability there. Then you will have one and you will need to settle that account.
If you don't they will freeze you bank account and any DD for utilities will be stopped, an issue if you have it let.

Baby01032012

Thanks. Spain property was only in my dads name. Not let but it’s Airbnbd during summer to cover costs.

Calahonda52

Baby01032012 wrote: »

Thanks. Spain property was only in my dads name. Not let but it’s Airbnbd during summer to cover costs.

Who does the tax work for the Spanish income?

I hope you trust you lawyer/that he is competent.
When i sold my gaff after 15 years, I discovered that my lawyer, same guy as before, had not cleared a registered charge against the property.
The debt was cleared but paperwork not done..Lawyer said it would take 6 months to resolve and to let the offer I had lapse, in a falling market.
I got it done in 5 days, 27 hrs of phone calls and a lot of stress

tricky D

Baby01032012 wrote: »

I just thought if solicitor delayed it until 1 September this would be a legitimate way to delay the CAT liability until next year. However solicitor disagrees.

It’s a 700000+ liability. I know I have 9 months nearly until it’s due but I’d like more time if possible to maybe raise money or get my finances in order. I’d hate to have to sell just to pay the liability.

Revenue will charge 8% interest and nearly 10% in penalties if I was to delay paying for a year that’s another 120,000 onto the liability.

Solicitor is correct. No point in any delaying.



You will get charged zero interest and zero penalties if you talk to Revenue and make an arrangement which will be you making payments only when you can ie. have the monies to do so.


I did the very same myself a few years back.

Baby01032012

tricky D wrote: »

Solicitor is correct. No point in any delaying.



You will get charged zero interest and zero penalties if you talk to Revenue and make an arrangement which will be you making payments only when you can ie. have the monies to do so.


I did the very same myself a few years back.

Did you really? That would be fantastic if I could come to some arrangement. I worked out if I delayed payment a year it would cost me 120000 in penalties and interest. I’m loosing sleep thinking of the amount I owe.

tricky D

Yes and a now former neighbour is doing the same, but she waited a year before doing so and has been hit for the penalty and interest for that year, but no more interest after that.

Revenue realise that Probate is taking a long time so take that into consideration, and that moving property takes time too.

However do not delay. We had the house sale agreed before Probate came through so the sale could not be finalised until Probate was completed. We informed Revenue of this and they did not quibble in any way once we demonstrated our position (sale agreed on daft listing did the trick just fine) and that we were moving at good pace. Some of us made a small partial payment at the initial deadline for what we could afford which made them happier and more accommodating.

Again Revenue are reasonable so talk to them. Also, see if your solicitor can speed up Probate which can happen if property needs to get moved faster.

Baby01032012

I’m waiting to talk to a financial and tax advisor. I’m hoping I can throw whatever cash is in the estate say 200k plus another 100k in savings at the debt. That would leave be with about 400k outstanding. There are a number of properties and all are tenanted. I have to weigh up selling property just to pay the tax versus taking out a large mortgage on one or more properties to finance the debt.
There also a holding company with 600k shares in it. However to liquidate that I’d be paying corporation tax at 25% and then 40% income tax to just get the cash to then pay CAT which would be nuts. I was thinking buy another property through the company and generate more income to then support a larger mortgage.
So it’s a sell v finance. And I’m hoping financial advisor can tell me which is best.

Calahonda52

As an accountant with some experience in this area you need a financial model with all the cash flows in is as well as asset values, which you will need/have for the probate, and the like and then see what is what: the key numbers being free cash flows and loan to value raise at different debt levels, with interest only and interest plus capital repayment calcs. My guess the LTV stress test should be fine base on you tax bill, unless a lot of it is in the company.
I would not recommend using up too much cash at this point, there is plenty money out there to borrow and you can get tax relief on the interest against the rental income. You see your self what happens when the assets are too chunky to allow easy liquidation.
.
re the FA: And I’m hoping financial advisor can tell me which is best.
the key piece that is missing is And I’m hoping financial advisor can tell me which is best FOR YOU

Baby01032012

Thanks Calahonda52

I’m an accountant too..although I work in a different area now..I just don’t trust myself with my own numbers.

Stress test I’ll be fine. The issue will be the times income. I’ll need to boost income on existing properties to help with that.

The company was just a life policy which now the surrender value of c 500k is paid back to the company. If I can’t liquidate the company without paying 2/3rds in tax I’ll probably invest it either in more property to boost income or something else if not going down the mortgage route

Marcusm

Baby01032012 wrote: »

I’m waiting to talk to a financial and tax advisor. I’m hoping I can throw whatever cash is in the estate say 200k plus another 100k in savings at the debt. That would leave be with about 400k outstanding. There are a number of properties and all are tenanted. I have to weigh up selling property just to pay the tax versus taking out a large mortgage on one or more properties to finance the debt.
There also a holding company with 600k shares in it. However to liquidate that I’d be paying corporation tax at 25% and then 40% income tax to just get the cash to then pay CAT which would be nuts. I was thinking buy another property through the company and generate more income to then support a larger mortgage.
So it’s a sell v finance. And I’m hoping financial advisor can tell me which is best.

You need to look carefully at the company position. Are the shares worth 600k or does the company own shares worth 600k. You need to ensure company is valued on a post tax basis. You will have CAT to pay on value if company but if its assets are realised, appoint a liquidator and you should receive the proceeds without further tax as you will have had a CAT liability on acquisition of the company.

You do need proper advice taking account of all relevant factors.

Baby01032012

Marcusm wrote: »

You need to look carefully at the company position. Are the shares worth 600k or does the company own shares worth 600k. You need to ensure company is valued on a post tax basis. You will have CAT to pay on value if company but if its assets are realised, appoint a liquidator and you should receive the proceeds without further tax as you will have had a CAT liability on acquisition of the company.

You do need proper advice taking account of all relevant factors.

Thanks Marcusm, the company is just 2 shareholders €2 shares held equally by my parents now deceased. The only asset of the company was a whole of life investment policy in name of company. On my mums death BOI confirmed policy would continue in my dads name. On my dads death the policy surrender value is paid back to the company. So I’d imagine the surrender value of €500000 will revert to the company once any exit/life assurance tax is deducted.

I’ll need to get proper advice on how and what liability there will be if I liquidated/ extract the €500000 from the company which I will have paid 33% CAT already in acquiring the shares.

If no further liability it might make sense to just use the 500000 to pay the CAT liability instead of mortgaging or selling the properties.

Waiting for advisor to get back to me.