Passing Of Estate

cronos

I'm going to throw out a hypothetical scenario and curious how it would go.

An estate worth say 100k to keep the numbers simple is passed from a brother to his sister on his passing. Soon after the sister passes and it is passed from that sister to her 4 kids.

A claim is made by somebody against the estate before any of the above passing has actually occurred. Let's say that claim ends up costing 20k (including legal fees) against the estate.

Is the settlement taken from the taxable amount? So capital acquisitions would be on the 80k?

Just curious about how the numbers play out in this scenario.

Peregrinus

Assuming the claim was actually against the brother before he died, then the sister inherited an estate worth (100k - 20k 80k. And on her death that is also the value of the inheritance received by her heirs.

So capital acquisitions tax will be calculated on the 80k value.

s7ryf3925pivug

Yeah that's what being a residual beneficiary means. You get what is left after any debts, expenses or specific bequests are paid.

cronos

Peregrinus wrote: »

Assuming the claim was actually against the brother before he died, then the sister inherited an estate worth (100k - 20k 80k. And on her death that is also the value of the inheritance received by her heirs.

So capital acquisitions tax will be calculated on the 80k value.

The claim was brought after the brother had died. The unrelated party said he had "helped out a lot over the years" and expected in his opinion to be included in the will. But no will was ever written. Don't want to go into much detail but the family don't believe he did much to help but that's a separate issue to the question here.

LawBoy2018

cronos wrote: »

The claim was brought after the brother had died. The unrelated party said he had "helped out a lot over the years" and expected in his opinion to be included in the will. But no will was ever written. Don't want to go into much detail but the family don't believe he did much to help but that's a separate issue to the question here.

Doesn't sound very 'hypothetical' to me, lol. If the brother died intestate, under what grounds would this 'unrelated party' be able to challenge the estate? Unless he had some sort of formal agreement with the deceased and provides evidence to that effect, I would imagine you're safe.

Disclaimer: I'm not a solicitor/barrister and anything I say is meant as an opinion, not advice.

Peregrinus

cronos wrote: »

The claim was brought after the brother had died. The unrelated party said he had "helped out a lot over the years" and expected in his opinion to be included in the will. But no will was ever written. Don't want to go into much detail but the family don't believe he did much to help but that's a separate issue to the question here.

The claim may only have been brought after the brother died, but it relates to things done, or things that happened, before his death. From what you say the claim is, basically, that when the brother died he owed obligations to the "unrelated party" to provide for him in some way.

Which means that, yeah, to the extend that the claim is a good claim the sister will only inherit what remains after the brother's obligation to the unrelated party is paid, and so it is that net amount on which any capital acquisitions tax liablity will be calculated.

(I express no opinion as to whether the claim is a good claim. I'm just answering the question raised in the hypothetical, which is about the CAT consequences if there were to be a good claim.)