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Child Item

Avoiding inheritance tax

Dr Brown

A mate of mine plans to sell his house before he dies and pass the money on in cash to his son to avoid inheritance tax.

He calls it "forward tax planning".

I'm just wondering is this legal ?

Can a family member hand out 500k in cash to their son without any tax liabilities ?

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Fred Swanson

This post has been deleted.

jimmycrackcorm

Dr Brown wrote:

Can a family member hand out 500k in cash to their son without any tax liabilities ?

There's a maximum limit, but with that amount of cash it would be advisable to consult a financial expert.

ANXIOUS

jimmycrackcorm wrote: »

There's a maximum limit, but with that amount of cash it would be advisable to consult a financial expert.

There is a limit per se, but anyone can give anyone €3,000 per year that never goes towards a limit.

So in essences your parents could give you €6k a year every year and have no tax liability or eat into your inheritance limit.

filbert the fox

the disponer can pass on to a son €310,000 tax free throughout their lifetime.

If he resides for a period in the house (?????? 4 years) before the death then there is an exemption but this op's mate does not seem to qualify under this heading.

Robbo

Dr Brown wrote: »

A mate of mine plans to sell his house before he dies and pass the money on in cash to his son to avoid inheritance tax.

He calls it "forward tax planning".

I'm just wondering is this legal ?

Can a family member hand out 500k in cash to their son without any tax liabilities ?

If they dole it out in €3,000 annual instalments over a period of 166 years or so.

The CAT threshold from parent-to-child is €310,000 and will only go up in future.

There are plenty of professional tax planners out there who can advise. Revenue are well aware of most amateur schemes to avoid tax and it would be unwise to embark upon such an endeavour considering the unavoidable paper trail for large parts of this scheme.

my3cents

ANXIOUS wrote: »

There is a limit per se, but anyone can give anyone €3,000 per year that never goes towards a limit.

So in essences your parents could give you €6k a year every year and have no tax liability or eat into your inheritance limit.

filbert the fox wrote: »

the disponer can pass on to a son €310,000 tax free throughout their lifetime.

..

Those posts seem at odds with each other?

Is the 3k included in the 310k?

Robbo

filbert the fox wrote: »

the disponer can pass on to a son €310,000 tax free throughout their lifetime.

If he resides for a period in the house (?????? 4 years) before the death then there is an exemption but this op's mate does not seem to qualify under this heading.

The Dwelling House exemption is heavily scrutinised these days. A lot of expensive piles in swanky parts of Dublin were being passed on in such a manner.

filbert the fox

my3cents wrote: »

Those posts seem at odds with each other?

Is the 3k included in the 310k?

See CAT aggregation rules.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/what-are-group-thresholds-rates-and-aggregation-rules.aspx

the €3k or €6k per annum must aggregate up to the threshold - it's not separate.

BTW the rules are hard to understand in terms of parent child relationship and other relationships.

Say your only son left a property worth €350,000 to an aged mother as the only survivor. She can only inherit from his estate €32,500 tax free leaving a hefty tax bill on the remaining €317,500!

Homer

Of course it’s possible to do but what is the son going to do with all that cash? Soon as he try’s to lodge it revenue will want to know where he got it!

filbert the fox

Dr Brown wrote: »

A mate of mine plans to sell his house before he dies and pass the money on in cash to his son to avoid inheritance tax.

He calls it "forward tax planning".

I'm just wondering is this legal ?

Can a family member hand out 500k in cash to their son without any tax liabilities ?

BTW when is he going to die?

BorneTobyWilde

filbert the fox wrote: »

the disponer can pass on to a son €310,000 tax free throughout their lifetime.

If he resides for a period in the house (?????? 4 years) before the death then there is an exemption but this op's mate does not seem to qualify under this heading.

What does that mean. So if I was to live in parents house for 6 years house could be inherited tax free, even above the 320k threshold ?

NewCorkLad

filbert the fox wrote: »

See CAT aggregation rules.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/what-are-group-thresholds-rates-and-aggregation-rules.aspx

the €3k or €6k per annum must aggregate up to the threshold - it's not separate.

BTW the rules are hard to understand in terms of parent child relationship and other relationships.

Say your only son left a property worth €350,000 to an aged mother as the only survivor. She can only inherit from his estate €32,500 tax free leaving a hefty tax bill on the remaining €317,500!

No the €3,000 gift exemption is separate and doesnt impact the inheritance thresholds.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-exemptions-and-reliefs/small-gift-exemption/index.aspx

BorneTobyWilde

Homer wrote: »

Of course it’s possible to do but what is the son going to do with all that cash? Soon as he try’s to lodge it revenue will want to know where he got it!

They look into peoples banks account now? WTF?

Reati

BorneTobyWilde wrote: »

They look into peoples banks account now? WTF?

Of course. It's a tax at source system. They know how much you get paid and if a large chunk of money appears out of the blue, the banks will tell revenue etc. to ensure it's not proceeds of crime etc

There is no hiding money any more.

Anyway, inheritance tax is an a disgraceful excuse for tax. Should be removed.

Kuva

http://www.independent.co.uk/news/uk/home-news/duke-of-westminster-son-avoids-inheritance-tax-billions-britains-richest-men-family-trusts-rules-a7998246.html

Trusts like this not doable here^^^

Must be.

Dr Brown

Kuva wrote: »

http://www.independent.co.uk/news/uk/home-news/duke-of-westminster-son-avoids-inheritance-tax-billions-britains-richest-men-family-trusts-rules-a7998246.html

Trusts like this not doable here^^^

Must be.

Bob Geldof also avoids inheritance tax.

http://www.dailymail.co.uk/news/article-468444/How-debt-crusader-Geldof-save-1-6m-death-tax.html

Dr Brown

Reati wrote: »

Of course. It's a tax at source system. They know how much you get paid and if a large chunk of money appears out of the blue, the banks will tell revenue etc. to ensure it's not proceeds of crime etc

There is no hiding money any more.

Anyway, inheritance tax is an a disgraceful excuse for tax. Should be removed.

If you keep cash under the mattress revenue etc would have no way of knowing about it.

ANXIOUS

filbert the fox wrote: »

See CAT aggregation rules.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/what-are-group-thresholds-rates-and-aggregation-rules.aspx

the €3k or €6k per annum must aggregate up to the threshold - it's not separate.

BTW the rules are hard to understand in terms of parent child relationship and other relationships.

Say your only son left a property worth €350,000 to an aged mother as the only survivor. She can only inherit from his estate €32,500 tax free leaving a hefty tax bill on the remaining €317,500!

The above is incorrect, the €3k is completely separate to the threshold. It's under the small gift excemption.

Also the dwelling home relief is gone for all intents and purposes unless you're disabled or some other conditions.

In relation to a child leaving his parents an inheritance there are ways around that as well.

[Deleted User]

trusts and holding companies are about the only way to do this - for the very rich (like Geldof) and super-rich (Dermot Desmond) link

aside from

the 3k euro a year
dwelling house exemptions (although rules have tightened down on this and you have to be living in the house etc beforehand)
the normal €310 k
bona fide family businesses and farms

could pass on the house if conditions met and and then charge the dad to rent-a-room there tax free - €14 k a year exemption on this.

BorneTobyWilde

ANXIOUS wrote: »

The above is incorrect, the €3k is completely separate to the threshold. It's under the small gift excemption.

Also the dwelling home relief is gone for all intents and purposes unless you're disabled or some other conditions.

In relation to a child leaving his parents an inheritance there are ways around that as well.

Gone?
Who would qualify ?
What conditions?

Fred Swanson

This post has been deleted.

[Deleted User]

filbert the fox wrote: »

BTW the rules are hard to understand in terms of parent child relationship and other relationships.

Say your only son left a property worth €350,000 to an aged mother as the only survivor. She can only inherit from his estate €32,500 tax free leaving a hefty tax bill on the remaining €317,500!

This is wrong. Parent/Child and Child/Parent are treated the same. OPs best bet is to seek professional advice.

ANXIOUS

BorneTobyWilde wrote: »

Gone?
Who would qualify ?
What conditions?

It's gone from the way it was previously used and abused. Google it and the revenue site is the first one that pops up.

[Deleted User]

BorneTobyWilde wrote: »

They look into peoples banks account now? WTF?

Banks and Credit Unions are obliged to report any large deposits to revenue. I’m not sure of the amount.

Homer

Anything above €5k as far as I can recall!

coylemj

Deleted User wrote: »

This is wrong. Parent/Child and Child/Parent are treated the same. OPs best bet is to seek professional advice.

Not according to the Revenue website ....

Group thresholds

You do not have to pay tax on a gift or inheritance if its value is below a particular group tax free threshold. The threshold you use depends on your relationship to the person who gave you the gift or inheritance. You must pay tax on any remaining value above that threshold. There are three group thresholds.

Group A: The person receiving the gift or inheritance is a child of the person giving it. This includes adopted children, step children and some foster children.

Group B: The person receiving the gift or inheritance has a family relationship with the person giving it. This includes a brother, sister, nephew, niece, grandparent, grandchild, a lineal ancestor or a lineal descendant of the person making the gift.

Group C: The person receiving the gift or inheritance has a relationship with the person giving it which is not already covered in Group A or B.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/what-are-group-thresholds-rates-and-aggregation-rules.aspx

According to that, a parent inheriting from a child would fall into Group B (as a 'lineal ancestor') whereas a child obviously falls into Group A.

[Deleted User]

coylemj wrote: »

Not according to the Revenue website ....

Group thresholds

You do not have to pay tax on a gift or inheritance if its value is below a particular group tax free threshold. The threshold you use depends on your relationship to the person who gave you the gift or inheritance. You must pay tax on any remaining value above that threshold. There are three group thresholds.

Group A: The person receiving the gift or inheritance is a child of the person giving it. This includes adopted children, step children and some foster children.

Group B: The person receiving the gift or inheritance has a family relationship with the person giving it. This includes a brother, sister, nephew, niece, grandparent, grandchild, a lineal ancestor or a lineal descendant of the person making the gift.

Group C: The person receiving the gift or inheritance has a relationship with the person giving it which is not already covered in Group A or B.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/what-are-group-thresholds-rates-and-aggregation-rules.aspx

According to that, a parent inheriting from a child would fall into Group B (as a 'lineal ancestor') whereas a child obviously falls into Group A.

This suggests otherwise. http://www.citizensinformation.ie/en/money_and_tax/tax/capital_taxes/capital_acquisitions_tax.html

Dr Brown

Fred Swanson wrote: »

This post has been deleted.

A lot of old people keep their money in the mattress.

filbert the fox

Dr Brown wrote: »

A lot of old people keep their money in the mattress.

how do you define "a lot", "old" and "their money"?

my3cents

Dr Brown wrote: »

A lot of old people keep their money in the mattress.

Tricky when bank notes change and the old ones are no longer accepted.

How do you for example change a mattress load of the old style €50 for the new ones when the old ones eventually get phased out?

https://www.ecb.europa.eu/euro/banknotes/europa/html/index.en.html

The first series of euro banknotes will continue to be issued alongside the Europa series of notes until the remaining stocks have been used up. They will then be gradually phased out.