nav[aria-label="Primary Navigation"] { padding: 0; & ul { list-style: none; width: 100%; display: flex; flex-direction: row; justify-content: start; align-items: start; gap: 30px; padding: 0; & li { margin: 0; } & ul li { list-style: none; } } }

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 ?

Find more posts tagged with

Quick Links

Comments

ScouseMouse

crossvilla wrote: »

Life's unfair! That's a first world problem. You mentioned earlier you would have a bill of €80k. That would suggest the inheritance exceeds €550k or your partner has previously inherited.

You can always sell your own property tax free to cover the debt and live in the property or no longer pay rent and just service €80k on a long term loan.

Current property is negative 100k.

Dr Brown

Arcade_Tryer wrote: »

Inheritance tax is probably the fairest form of tax in existence, much more so than income tax for example, for it attempts to eliminate the lottery of birth and the accumulation and hoarding of wealth by small sections of society.

The super rich will always find ways to avoid taxes. Middle class entitlement means many non-super rich people feel they should enjoy the same privilege.

Inheritance tax is Bullsh1t.

Its not just the super rich but travellers also seem to be tax exempt.

[Deleted User]

Dr Brown wrote:

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

No. A person has a threshold ( I think it is around 300k)that they can inherit or receive as a gift from a parent in their lifetime. You can receive 3k per year tax free without effecting their lifetime allowance

[Deleted User]

ANXIOUS wrote:

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

You can only receive a total of 3k per year. If two people give you 3k each in the same year then 3k is tax free and the other 3k is taxable

Homer

Dr Brown wrote: »

Inheritance tax is Bullsh1t.

Its not just the super rich but travellers also seem to be tax exempt.

In fairness travellers couldn’t give a toss about any of our countrys laws full stop!

hullaballoo

Arcade_Tryer wrote: »

Inheritance tax is probably the fairest form of tax in existence, much more so than income tax for example, for it attempts to eliminate the lottery of birth and the accumulation and hoarding of wealth by small sections of society.

The super rich will always find ways to avoid taxes. Middle class entitlement means many non-super rich people feel they should enjoy the same privilege.

That's very much a political point of view.

From a legal point of view, it's completely unfair and unjust.

Spanish Eyes

Does anyone else think the Revenue website has been dumbed down enormously, well I'm only looking at CAT at the moment. At one stage it was very comprehensive. I personally don't think it's great anymore. On a high level, yes it gives you the information, but digging deeper means a lot of work now!

Anyway, there is a provision in the Agricultural Relief section 89 par 3, where a person could either gift or leave any type of property to a beneficiary subject to the condition that it is invested in Ag Property within two years. If that happened, AND the beneficiary qualified for the Relief a 90% reduction applies to the cash/house/stocks shares etc. given. That's neat and one I will be using when I win the Euromillions!

Also, under Section 79, if a parent made a non exempt gift to a child within five years of the child's death, and the parent/s inherit, the entire inheritance is exempt. Doesn't make up for losing your child though.

There are a few ways around Inheritance Tax. You don't need fancy Big Four folk to see it either. Just read the Act.

I must enter a caveat here. I am just a dilletante, but am interested in the way taxation works here. So I could be totally wrong about the above! If so, sorry if I got your hopes up....

P. Breathnach

hullaballoo wrote: »

That's very much a political point of view.

From a legal point of view, it's completely unfair and unjust.

Does that not depend on which side of the argument your client favours?

BorneTobyWilde

Can you inherit a house of any value if it's your only home and living there 10 years plus ?

nompere

Sleeper12 wrote: »

You can only receive a total of 3k per year. If two people give you 3k each in the same year then 3k is tax free and the other 3k is taxable

No - every €3,000 you get from different people is exempt. If you can find 100 different people to give you €3,000 each then you have €300,000 in your pocket. Then if you can get them all to do the same again next year, it's still exempt.

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

seamus

In the OPs case if the father's goal is to avoid the future value of the asset from stinging them for tax, he could give the property to both sons now and enter a caretaker agreement to live in the house for the rest of his life.

The CGT payable is then only on the increase in value between the gifting date and date of sale. And if one sibling takes the house as their PPR, no CGT is payable at all.

Arcade_Tryer

hullaballoo wrote: »

That's very much a political point of view.

From a legal point of view, it's completely unfair and unjust.

No, it's why economists make public policy and not legal professionals.

Reati

Arcade_Tryer wrote: »

Inheritance tax is probably the fairest form of tax in existence, much more so than income tax for example, for it attempts to eliminate the lottery of birth and the accumulation and hoarding of wealth by small sections of society.

From a technical standpoint you are right. In fact that is where the tax comes from, getting the wealth out of the hands of "old money". The reality today is that everyone but the super rich are screwed as they can avoid it but Joan has to sell her parents family home because she can't afford to pay the tax on it.

Peregrinus

Reati wrote: »

From a technical standpoint you are right. In fact that is where the tax comes from, getting the wealth out of the hands of "old money". The reality today is that everyone but the super rich are screwed as they can avoid it but Joan has to sell her parents family home because she can't afford to pay the tax on it.

Yes, but why is that unjust? She didn't buy the home, she didn't build it, it's pure good fortune that she has inherited a large house when Mary, across the road, has not. Should other people pay higher income tax than they already do on the money they earn, or higher VAT on the goods and services they purchase, so that Joan can enjoy her good fortune to the full?

ANXIOUS

Sleeper12 wrote: »

You can only receive a total of 3k per year. If two people give you 3k each in the same year then 3k is tax free and the other 3k is taxable

That's incorrect.

coylemj

hullaballoo wrote: »

That's very much a political point of view.

From a legal point of view, it's completely unfair and unjust.

Surely the situation is that the tax laws are passed by the Oireachtas and implemented by revenue - what else is there to judge about taxes 'from a legal point of view'?

If what you really mean is that lawyers don't like CAT because it dilutes wealth as it passes between the generations then why not just come out and say so?

Reati

Peregrinus wrote: »

Yes, but why is that unjust? She didn't buy the home, she didn't build it, it's pure good fortune that she has inherited a large house when Mary, across the road, has not. Should other people pay higher income tax than they already do on the money they earn, or higher VAT on the goods and services they purchase, so that Joan can enjoy her good fortune to the full?

Because the family has already paid all the taxes and dues and costs for that house while they were alive. They don't own the state anything and they want to give it to the child to set them up for a comfortable life. They own the wealth and it's unjust that the state can take a large chunk of it after a live of paying income taxes, property taxes and the live.

Mary doesn't play into the equation at all nor should she.

The comment about increasing tax is nonsense and I know where you're going with it. Fiscal responsibility with spending public funds would be a better target. Ya know, nonsense like this?

https://www.irishtimes.com/news/environment/council-to-spend-500-000-on-lowering-clontarf-sea-wall-1.3348943

Lumen

Reati wrote: »

Because the family has already paid all the taxes and dues and costs for that house while they were alive. They don't own the state anything and they want to give it to the child to set them up for a comfortable life. They own the wealth and it's unjust that the state can take a large chunk of it after a live of paying income taxes, property taxes and the live.

It's normal that money is taxed more than once.

My company earns money, pays corporation tax. Then payroll taxes before it gets to me. I buy food from Tesco, Tesco pays corporation tax, Tesco worker pays payroll taxes. And so on.

Everyone thinks they should pay less tax. I sometimes wonder whether people who get so irate about paying inheritance tax are doing so because they're not used to paying taxes.

Dr Brown

You should only have to pay inheritance tax on assets over a 1 Million Euro.

coylemj

Dr Brown wrote: »

You should only have to pay inheritance tax for assets over a 1 Million Euro.

In other words, it's ok for someone else to pay CAT, but not you.

StupidLikeAFox

Could you set up a company, transfer the house to the company, then the company could rent the house to whoever it wanted to?

You would also own the company too btw. Not sure if this is legal but in theory it might work

Dr Brown

coylemj wrote: »

In other words, it's ok for someone else to pay CAT, but not you.

Nobody should have to pay it but if they do have it, it should only kick in after 1 million euro.

tricky D

BorneTobyWilde wrote: »

Can you inherit a house of any value if it's your only home and living there 10 years plus ?

3 years but must live in it for 6 further years. Some relief possible if you move elsewhere before 6 years - lots of conditions.

Dwelling House Exemption
https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-exemptions-and-reliefs/exemption-for-dwelling-house/index.aspx

Arcade_Tryer

Reati wrote: »

From a technical standpoint you are right. In fact that is where the tax comes from, getting the wealth out of the hands of "old money". The reality today is that everyone but the super rich are screwed as they can avoid it but Joan has to sell her parents family home because she can't afford to pay the tax on it.

That's unfair for Joan relative to the super rich (who will always escape the little people problems so it's kind of irrelevant to compare), but Joan is still far better off relative to those who do not inherit assets.

Peregrinus

Reati wrote: »

Because the family has already paid all the taxes and dues and costs for that house while they were alive. They don't own the state anything and they want to give it to the child to set them up for a comfortable life. They own the wealth and it's unjust that the state can take a large chunk of it after a live of paying income taxes, property taxes and the live.

"The family" don't own it. The former owner is dead, and dead people can't own stuff. Joan may own it after their death, if a combination of Irish inheritance law and the will that the former owner made have this effect, but it means she acquires ownership of an asset, effectively, for free; she didn't make it, she didn't pay for it. From her point of view, it's pure good fortune.

Reati wrote: »

Mary doesn't play into the equation at all nor should she.

She certainly does. The claim made here, remember, is that inheritance tax is "unjust". Every cent that is not collected in tax from Joan is a cent either that will have to be collected from Mary, or that will not be available to provide services to Mary. The notion that we can answer questions about the justice of inheritance tax without considering its implications for the community is not a very appealing one.

(This is true regardless of whether public expenditure is efficient or inefficient. The efficiency question may have implications for taxation generally, but the suggestion that it has particular implications for the justice of inheritance tax is just silly.)

Reati

Peregrinus wrote: »

"The family" don't own it. The former owner is dead, and dead people can't own stuff. Joan may own it after their death, if a combination of Irish inheritance law and the will that the former owner made have this effect, but it means she acquires ownership of an asset, effectively, for free; she didn't make it, she didn't pay for it. From her point of view, it's pure good fortune.

She certainly does. The claim made here, remember, is that inheritance tax is "unjust". Every cent that is not collected in tax from Joan is a cent either that will have to be collected from Mary, or that will not be available to provide services to Mary. The notion that we can answer questions about the justice of inheritance tax without considering its implications for the community is not a very appealing one.

(This is true regardless of whether public expenditure is efficient or inefficient. The efficiency question may have implications for taxation generally, but the suggestion that it has particular implications for the justice of inheritance tax is just silly.)

An academic reply as ever they come

Fred Swanson

This post has been deleted.

Marcusm

hullaballoo wrote: »

That's very much a political point of view.

From a legal point of view, it's completely unfair and unjust.

I’m very confused as to how you can regard it as unjust. To my mind, an unjust law would have to be one that was unquestionably discriminatory, e.g. CAT applies only to inheritances taken by red haired persons or where it served to expropriate property.

Peregrinus

StupidLikeAFox wrote: »

Could you set up a company, transfer the house to the company, then the company could rent the house to whoever it wanted to?

You would also own the company too btw. Not sure if this is legal but in theory it might work

Fred Swanson wrote: »

This post has been deleted.

Perfectly legal, but I don't think it confers any tax benefit. The transfer of the house to the company would of course attract stamp duty. Rent received by the company would be taxable in the hands of the company and then, when distributed as dividends to the shareholders, taxable in their hands as income. If the house were let at below-market or nil rent to people connected with the company - i.e. family members - that would be taxable as a gift to them. And the house, while held by the company, would not benefit from the principal private residence relief from CGT when eventually sold.

So, all-in-all, from a tax point of view, this is probably a bad idea.

Claw Hammer

There are accountants and lawyers who spend a lot of time trying to (legally) get around various tax laws. The Revenue has an anti-avoidance unit to monitor such schemes.
If a scheme is tried and is unsuccessful the taxpayer has to pay the tax they would have paid plus costs and interest. Some professionals have been sued as a result of their schemes coming unstuck.
If a scheme is tried, works and becomes widespread, there will be new legislation introduced to plug the gap.
The chances any anybody posting details of an original, watertight scheme on boards are extremely low and the chances of anybody posting the details of any working scheme are very little higher.