Inheritance from Grandfather

patsy_mccabe · 16-01-2021 3:04pm #1

Anyone know how a farm can be transferred from a grandfather to grandson tax efficiently?
Grandfather is very sick at the moment and grandson is working the farm for him. He's a young relative of mine and I want to point him in the right direction. He has enough on his plate at the moment and he's stressed over it all.

I know he can go talk to a solicitor or tax expert, but I know from experience that its good to have an idea whats involved in advance.

893bet · 16-01-2021 3:22pm

I assume it can be avoided using the same mechanism as “favourite nephew”?

Dinzee Conlee · 16-01-2021 4:12pm

I don’t know if favourite nephew would apply - they don’t state grandchildren on revenue. Would need to check with someone who knows... Definitely worth following up...
https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-reliefs/favourite-nephew-or-niece-relief/index.aspx

Agriculture relief could come into play - be good to familiarise yourself with these before you talk to anyone...
https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-reliefs/agricultural-relief/what-are-the-conditions-for-agricultural-relief.aspx

Might be worth looking into not going from grandfather to grandson, but grandfather to father/mother and then grandson.

Different thresholds come into play when inheriting from grandfather vs parent...
https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-groups-and-group-thresholds.aspx

If you were to go grandfather to father to grandson - stamp duty would be payable on the second transfer I think...
https://www.revenue.ie/en/property/stamp-duty/gifts-and-inheritances/inheritances.aspx

JeffKenna · 16-01-2021 6:14pm

Is the grandsons father still alive?

wrangler · 16-01-2021 6:24pm

Dinzee Conlee wrote: »

I don’t know if favourite nephew would apply - they don’t state grandchildren on revenue. Would need to check with someone who knows... Definitely worth following up...
https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-reliefs/favourite-nephew-or-niece-relief/index.aspx

Agriculture relief could come into play - be good to familiarise yourself with these before you talk to anyone...
https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-reliefs/agricultural-relief/what-are-the-conditions-for-agricultural-relief.aspx

Might be worth looking into not going from grandfather to grandson, but grandfather to father/mother and then grandson.

Different thresholds come into play when inheriting from grandfather vs parent...
https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-groups-and-group-thresholds.aspx

If you were to go grandfather to father to grandson - stamp duty would be payable on the second transfer I think...
https://www.revenue.ie/en/property/stamp-duty/gifts-and-inheritances/inheritances.aspx

I know someone that was allowed the favourite nephew allowance even though they were no relation but had worked with the owner for year

patsy_mccabe · 16-01-2021 6:49pm

JeffKenna wrote: »

Is the grandsons father still alive?

Thanks for the replies.
It's his mother's father's farm. He reckons it would be easier to do tru an uncle, it that's whats required.
I knew about the 'favourite nephew' clause.

There's a house too. Does that come under the farm or is it treated seperately?

16-01-2021 6:52pm

I assume consanguinity relief is out of the qs,person transferring need to be under 67 or so

trg · 16-01-2021 6:53pm

patsy_mccabe wrote: »

Thanks for the replies.
It's his mother's father's farm. He reckons it would be easier to do tru an uncle, it that's whats required.
I knew about the 'favourite nephew' clause.

There's a house too. Does that come under the farm or is it treated seperately?

Patsy, I genuinely think your wasting your time here asking those questions on what is a farming forum.

Go to a farm tax expert and get their advice.

What you're asking is very specific, you'll never be able to give full picture here and posters with the best will in the world are simply incorrect in some assumptions and assertions.

JeffKenna · 16-01-2021 7:02pm

patsy_mccabe wrote: »

Thanks for the replies.
It's his mother's father's farm. He reckons it would be easier to do tru an uncle, it that's whats required.
I knew about the 'favourite nephew' clause.

There's a house too. Does that come under the farm or is it treated seperately?

Ah ok, I was going down the road that a grandparent can gift to a grandchild as a parent if the child's parent is deceased.

If it's the mother father's farm I'd be inclined to put it into her name number 1 (but she would have to qualify as a farmer for that) and then long term lease it for 7 years. Same principle would apply for the favourite nephew. I guess the individuals wealth and ability to pass the 80/20 would be the big factor there.

House would be considered as part of the farm yes.

LawBoy2018 · 16-01-2021 7:04pm

JeffKenna wrote: »

Ah ok, I was going down the road that a grandparent can gift to a grandchild as a parent if the child's parent is deceased.

If it's the mother father's farm I'd be inclined to put it into her name number 1 (but she would have to qualify as a farmer for that) and then long term lease it for 7 years. Same principle would apply for the favourite nephew. I guess the individuals wealth and ability to pass the 80/20 would be the big factor there.

House would be considered as part of the farm yes.

That's a bit dodgy though and could lead to issues down the line if the son fell out with his mother/siblings.

JeffKenna · 16-01-2021 7:09pm

LawBoy2018 wrote: »

That's a bit dodgy though and could lead to issues down the line if the son fell out with his mother/siblings.

That's why I put the mother number 1. Would have to be trust there.

LawBoy2018 · 16-01-2021 7:11pm

JeffKenna wrote: »

That's why I put the mother number 1. Would have to be trust there.

What do you mean 'mother number one'? If it's left to his mother, she could then decide to bequeath the property however she liked.

JeffKenna · 16-01-2021 7:14pm

LawBoy2018 wrote: »

What do you mean 'mother number one'? If it's left to his mother, she could then decide to bequeath the property however she liked.

Indeed she could

patsy_mccabe · 16-01-2021 7:28pm

trg wrote: »

Patsy, I genuinely think your wasting your time here asking those questions on what is a farming forum.

Go to a farm tax expert and get their advice.

What you're asking is very specific, you'll never be able to give full picture here and posters with the best will in the world are simply incorrect in some assumptions and assertions.

Oh, I agree and I did say that in the first post. I can't get involve, but he has asked me for advice. He just seems confused and stressed over everything. I'd just like to have some ideas in his head when he talks to a solicitor.

Dinzee Conlee · 16-01-2021 7:32pm

patsy_mccabe wrote: »

Thanks for the replies.
It's his mother's father's farm. He reckons it would be easier to do tru an uncle, it that's whats required.
I knew about the 'favourite nephew' clause.

There's a house too. Does that come under the farm or is it treated seperately?

Not sure why you would need to involve an uncle? If would only make it more complex in tax terms...
It can go to his mother and the next day go to him if that’s what they agree...

House could be considered part of the farm...

As someone else has said, you need to talk to an expert but no harm to look up the necessary reliefs and have an understanding before you talk...

Best of luck...

LawBoy2018 · 16-01-2021 7:33pm

patsy_mccabe wrote: »

Oh, I agree and I did say that in the first post. I can't get involve, but he has asked me for advice. He just seems confused and stressed over everything. I'd just like to have some ideas in his head when he talks to a solicitor.

The obvious relief which might be available for CAT is agricultural relief.

This kid is presumably a farmer full time?

Good loser · 16-01-2021 7:33pm

Some solicitors have the reputation for being good at such a thing.

Probably first port of call should be to an accountant.

Big focus feature on farm tax/inheritance in this week's IFJ (16/1/21) by IFAC pages 40 to 44.

Good loser · 16-01-2021 7:38pm

A key question would be whether the parent/child reliefs can be applied for a grandparent/grandchild transfer.
An enquiry to the Revenue should clear that up. Patsy could do that directly.

LawBoy2018 · 16-01-2021 7:40pm

Good loser wrote: »

A key question would be whether the parent/child reliefs can be applied for a grandparent/grandchild transfer.
An enquiry to the Revenue should clear that up. Patsy could do that directly.

They obviously can't. If the agricultural relief isn't available, he'll be paying CAT.

whelan2 · 16-01-2021 7:42pm

Is your local teagasc advisor any good. We are doing stuff here too on farm transfer and our teagasc man has been very good

JeffKenna · 16-01-2021 7:44pm

whelan2 wrote: »

Is your local teagasc advisor any good. We are doing stuff here too on farm transfer and our teagasc man has been very good

Teagasc have a specialised person for this. They had an inheritance briefing last December I think that is probably still on the site. Worth a listen and you'd get his name from that.

Pawwed Rig · 16-01-2021 7:46pm

wrangler wrote: »

I know someone that was allowed the favourite nephew allowance even though they were no relation but had worked with the owner for year

Did they get an opinion on it or has it just not been challenged by Revenue?
You can claim whatever you like but it might not always stand up if scrutinised.

patsy_mccabe · 16-01-2021 8:02pm

I was talking to a tax expert once and he said something very insightful about the revenue. He said that they don't want to break up viable businesses. Think about it, why would they? You will be paying them tax for the rest of your life. Most farmers are part-time and therefore highly productive individuals.
This is why if you don't qualify for agricultural relief, you will get business relief. I suspect there is a similar route here like 'favourite nephew' for grandchildren.

LawBoy2018 · 16-01-2021 8:10pm

patsy_mccabe wrote: »

I was talking to a tax expert once and he said something very insightful about the revenue. He said that they don't want to break up viable businesses. Think about it, why would they? You will be paying them tax for the rest of your life. Most farmers are part-time and therefore highly productive individuals.
This is why if you don't qualify for agricultural relief, you will get business relief. I suspect there is a similar route here like 'favourite nephew' for grandchildren.

The criteria is provided for in the TCA 1997. If you don't meet it, good luck. Revenue don't care about whether or not one may be a highly productive individual. Any discretion afforded to them will be used to ensure that the legatee pays CAT.

wrangler · 16-01-2021 8:29pm

Pawwed Rig wrote: »

Did they get an opinion on it or has it just not been challenged by Revenue?
You can claim whatever you like but it might not always stand up if scrutinised.

It's 20 years a go now, so it's obviously right also a neighbour got the same concession taking land from his grandfather lately.

trg · 16-01-2021 8:36pm

patsy_mccabe wrote: »

I was talking to a tax expert once and he said something very insightful about the revenue. He said that they don't want to break up viable businesses. Think about it, why would they? You will be paying them tax for the rest of your life. Most farmers are part-time and therefore highly productive individuals.
This is why if you don't qualify for agricultural relief, you will get business relief. I suspect there is a similar route here like 'favourite nephew' for grandchildren.

Revenue are guided by their own legislation. There is no doubt they don't want to break up viable businesses but they won't go outside the scope of the legislation.

Favourite nephew relief is only available to nephews or nieces of people running a business, including a farm.

You said "if you don't qualify for agricultural relief, you will get business relief" - you said WILL.....this is not accurate.

I've experience from a former life in this and I'm just pointing out 3 parts of one post that are not accurate and I'm not trying to be a dose or condescending.

If the lad is stressed out then dealing in facts is the only way, false assumptions will only make things worse.

Appointment with IFAC or FDC for the tax side of things first and then perhaps ask them for a recommendation of a very good practical (important) solicitor.

Base price · 16-01-2021 8:39pm

Patsy, try talking to the IFA first and maybe they can give you a better idea. As far as I know you don't have to be a member.
https://www.ifa.ie/farm-succession/

Grueller · 16-01-2021 8:43pm

Tell him not to stress, being gifted a farm should not be a reason to stress you out. Sit back and look at the opportunity that is being given.
As has been said, a good solicitor and accountant before doing anything. I always thought that an accountant, as dear as mine is, pays back his fee every year in multiples. I would be on the phone at 9.00am on Monday morning.

LawBoy2018 · 16-01-2021 8:48pm

The only thing he needs to at the minute is spend time with his dying grandfather. If he owes a significant tax bill and he doesn't have the means to pay it, Revenue will likely be open to negotiations as to how/when he offsets his tax liabilities.

16-01-2021 8:53pm

What does the grandfather want to do? Has he got other children and grandchildren?

patsy_mccabe · 16-01-2021 9:19pm

Look, I'll say it again, I'm not advising him as to what to do, I'm merely suggesting options which may be open to him, before he talks to a solicitor. Thats all.

Pawwed Rig · 16-01-2021 9:22pm

wrangler wrote: »

It's 20 years a go now, so it's obviously right also a neighbour got the same concession taking land from his grandfather lately.

Not necessarily. It may be that they just never questioned the claim. Revenue are not as all seeing as many believe.

trg · 16-01-2021 9:24pm

Pawwed Rig wrote: »

Not necessarily. It may be that they just never questioned the claim. Revenue are not as all seeing as many believe.

True. And paper doesn't refuse ink. You'd be majorly in the soup though if they picked it up sometime.

Pawwed Rig · 16-01-2021 9:25pm

trg wrote: »

True. And paper doesn't refuse ink. You'd be majorly in the soup though if they picked it up sometime.

Probably never will if it was 20 years ago now

trg · 16-01-2021 9:29pm

Pawwed Rig wrote: »

Probably never will if it was 20 years ago now

Agreed but someone mentioned about a neighbour a year ago. I'd be sweating if I was them.

Mooooo · 16-01-2021 9:35pm

I'd be suggesting he go to an accountant before a solicitor, with FDC here and happy with them. Accountants would give a better idea of any financial outlays there would be if that's one of his main worries. Only other thing is for him to keep communication open with his family.
As every situation is unique the professionals are the people to talk to. Knowing what the outcomes may be would in itself relieve a bit of pressure, at least whatever it is can be planned for.

wrangler · 16-01-2021 11:55pm

LawBoy2018 wrote: »

They obviously can't. If the agricultural relief isn't available, he'll be paying CAT.

He's entitled to over 30000 tax free from the grandfather anyway which is over 300000 euros worth of farmland/assets before he has to pay tax and after that it's only 3.3% tax on the rest of the inheritance

JeffKenna · 17-01-2021 12:05am

wrangler wrote: »

He's entitled to over 30000 tax free from the grandfather anyway which is over 300000 euros worth of farmland/assets before he has to pay tax and after that it's only 3.3% tax on the rest of the inheritance

Sur the house alone would surely be worth 150/200k. Wouldn't be long hitting 300k. It's 33% btw.

wrangler · 17-01-2021 12:21am

JeffKenna wrote: »

Sur the house alone would surely be worth 150/200k. Wouldn't be long hitting 300k. It's 33% btw.

Very few farms get the value of the house unless the house is exceptional and land is valued at 10% of it's true value if you adhere to certain conditions so that works out at 3.3% tax on the total value of the farm

longgonesilver · 17-01-2021 12:32am

I have seen in writing from an authoritative source that Grandfather to Grandson has been accepted by revenue. I think it was in Osullivans Handbook for Farmers.

https://www.farmershandbook.ie/

This could possibly be applied on a sympathy basis for instance if the son/father had died tragically and each case would be looked at individually. If the middle link is still alive and a substantial tax saving was been made by jumping a generation rather than going through the two steps Revenue might not look favourably on it.

Above all he has to satisfy the labour requirements. Documentation helps.

http://www.som.ie/wp-content/uploads/2019/08/Saving-a-Fortune-in-the-Farm-Succession-Stakes.pdf

Is the dwelling excluded from agriculture relief?

J.O. Farmer · 17-01-2021 1:37am

I thought the house qualified if on the farm.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-reliefs/agricultural-relief/what-is-agricultural-property.aspx

longgonesilver · 17-01-2021 1:52am

I would have thought so but in the article I linked to it states it is excluded from favourite neice/nephew. The author would be considered an expert.

vurstflavor · 17-01-2021 2:33am

Has a will been made

Akesh · 17-01-2021 2:49am

Assuming the grandfather has not worked the farm himself continuously for 10 years prior to the date of transfer very little relief will apply and therefore you should go to a tax expert who has good experience in the transfer of farmland to ensure you're getting the best advice.

greysides · 17-01-2021 3:14am

Mod

I think the recurring theme in the posts in this thread is to seek professional advice.
I appreciate that the OP sought ideas, rather than legal advice, but the thread has gone in that direction.
I hope the discussion has been of some use.
However, I've grown uncomfortable with it and am closing it now. Thanks to those who contributed.

Inheritance from Grandfather

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