Leave house in trust to reduce inheritance tax

Sarah1916

A few friends were discussing inheritance tax etc. this evening and we were talking about ways in which inheritance tax planning could reduce any future bills.

A friend of mine is due to be left a house by an uncle of hers which is worth today approx. €700k. He has no children or other nieces or nephews.

my friend has 2 kids of her own who are both under 10 and was thinking that possibly the most tax efficient way for her uncle to Leave her the house would be for him to leave it to her plus her 2 kids in trust.

would that situation reduce the tax bill by much or would it just mean that the tax bill would be the same but just divided 3 ways? Ie, her and her 2 kids. If it is left in trust to under 18’s - are they still liable for tax on death of the uncle?

and also in reality, would it mean the house couldn’t be sold until the kids are over 18?

she plans to seek proper financial advise but just trying to think of ideas to help reduce any tax if possible.

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Bicyclette

This is what you need to look at: https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-groups-thresholds.aspx

Children, regardless of age, are liable for Capital Acquisitions Tax.

If the house is left your friend and her children, she will fall under Group B and her children will fall under Group C. So the total allowances to put against the house are €65,000 assuming the bands stay the same. CAT is then payable at 33%. So, at the valuation given above, you would have a total tax bill of approximately €212,000.

But she really does need to get some good advice.

Widdensushi

https://www.boards.ie/discussion/comment/118836917#Comment_118836917

I presume that you have donated all you have to mm and lv pension schemes and are currently living in a tent, better to donate before death so that you get to see the fruits of your donations.

Sono Topolino

Trusts can push out the date of the inheritance tax bill, but if you're not cafeful there's an initial 6% surcharge on the assets settled in the trust and an aannual trust tax of 1% per annum on settled property. Trust tax applies on top of the inheritance tax at 33%.

AFAIK this only kicks in when the beneficiary is 21, so assuming they get assets at 18 trust tax doesn't apply - but definitely see an accountant.