Inheritance and Life insurance

whydoibother

I have a German friend whose father passed away. He left her over 20K of life insurance and some inheritance which has not yet been sorted, but she got the insurance already. Now the guy in Germany whos dealing with her inheritance is asking if she has reported this amount to the tax office.
Since we are not in Germany, does she need to report the life insurance to the tax office here in Ireland or not? And why?
Same question for the inheritance.
Also, why do the Germans need to know whether she told the tax office here in Ireland or not?

homer911

You are not clear on where everyone is resident for tax purposes but lets assume your German friend is resident in Ireland..

Because the Executor may be liable if the beneficiary doesn't pay up! If the deceased lived in Germany then local laws also apply of course

Because they are liable to pay taxes where they are resident for tax purposes

The fact that its a maturity of a life insurance policy is irrelevant

whydoibother

She's actually not Irish or German, but she is a EU citizen living in Ireland for the last 20 years.Her father was equally not Irish or German.
But can you please clarify what has the life insurance to do with the inheritance? Her dad died a year ago and she's still waiting.

Jim2007

whydoibother wrote: »

She's actually not Irish or German, but she is a EU citizen living in Ireland for the last 20 years.Her father was equally not Irish or German.
But can you please clarify what has the life insurance to do with the inheritance? Her dad died a year ago and she's still waiting.

In German law it forms part of the estate and the executor is required to ensure that the taxes are paid.



She is Irish resident and taxable in Ireland, so yes she needs to report it and confirm this to the German executor.

Jim2007

Jim2007 wrote: »

In German law it forms part of the estate and the executor is required to ensure that the taxes are paid.



She is Irish resident and taxable in Ireland, so yes she needs to report it and confirm this to the German executor.

There is no obligation to report a small inheritance like this in Ireland (from a parent). Unless she has received considerable gifts or inheritances from her parents before and is above 80% of the tax free group A threashold then she doesn’t need to do anything or report anything and should inform the executer of this.

Put simply a gift/inheritance must exceed 80% of the relevant threshold (or aggregate gifts must exceed it) before it needs to be reported.

Heres Johnny

I worked in life insurance for a few years and the best bit of advice my mentor gave me served me well in my career.....don't ever give legal advice.

Let your advice extend as far as advising the claimant to engage a solicitor. So I am going to pass this on here, get your friend to take proper legal advice, don't do it solo and certainly don't do it on an anonymous internet forum.

For example, the post before mine has ignored the rest of the inheritance and has focused only on the life insurance part and has advised not reporting it.

Jim2007

Harrison Uneven Plank wrote: »

There is no obligation to report a small inheritance like this in Ireland (from a parent). Unless she has received considerable gifts or inheritances from her parents before and is above 80% of the tax free group A threashold then she doesn’t need to do anything or report anything and should inform the executer of this.

Put simply a gift/inheritance must exceed 80% of the relevant threshold (or aggregate gifts must exceed it) before it needs to be reported.

They are going to need something to satisfy the the German executor...

Jim2007

Jim2007 wrote: »

They are going to need something to satisfy the the German executor...

She can simply provide a link to the irish rules on this indicating that there is no obligation to report it to tax authorities. If he isn't happy with that then tough luck for him.

Heres Johnny wrote: »

For example, the post before mine has ignored the rest of the inheritance and has focused only on the life insurance part and has advised not reporting it.

I ignored nothing, my post clearly states that if the sum of the life insurance and inheritance are below 80% of the life time threshold then there is no obligation to report. The op said "some" inheritance so I would take it that it is not significant but none the less I have fully explained when reporting is required but just to spell it out.

insurance + inheritance < 268K (using oct 2019 to oct 2020 threshold) = no need to report
insurance + inheritance > 268k then reporting needed
insurance + inheritance + previous gifts/inheritances from parents >268k then reporting needed.

whydoibother

She reported this today to the revenue and was told that all inheritance is taxed at 33%

Harrison Uneven Plank wrote: »

She can simply provide a link to the irish rules on this indicating that there is no obligation to report it to tax authorities. If he isn't happy with that then tough luck for him.



I ignored nothing, my post clearly states that if the sum of the life insurance and inheritance are below 80% of the life time threshold then there is no obligation to report. The op said "some" inheritance so I would take it that it is not significant but none the less I have fully explained when reporting is required but just to spell it out.

insurance + inheritance < 268K (using oct 2019 to oct 2020 threshold) = no need to report
insurance + inheritance > 268k then reporting needed
insurance + inheritance + previous gifts/inheritances from parents >268k then reporting needed.

whydoibother

whydoibother wrote: »

She reported this today to the revenue and was told that all inheritance is taxed at 33%

Only if she has received over 300k from her parents previously, so either she has or she/you are mistaken.

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

whydoibother

whydoibother wrote: »

She reported this today to the revenue and was told that all inheritance is taxed at 33%

A solicitor or accountant, familiar with European laws is your pals best bet rather than random strangers opinions on the internet.

whydoibother

She’s group B not A. I though he was her dad but he was her dads brother, so perhaps that makes a difference.

Harrison Uneven Plank wrote: »

Only if she has received over 300k from her parents previously, so either she has or she/you are mistaken.

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

Heres Johnny

whydoibother wrote: »

She’s group B not A. I though he was her dad but he was her dads brother, so perhaps that makes a difference.

There's a big difference alright. 32,500 threshold for extended family like an uncle. Again, get on to a solicitor. I had 2 clients die when I was in the industry, 1 had a life policy with me and the other had a pension. Both got paid out but had to be done through legal professionals. Absolute minefield here especially with the cross border taxation.

whydoibother

Jim2007 wrote: »

They are going to need something to satisfy the the German executor...

Yes, I think the executor has all the power here from what she says.

Thanks for your suggestions, I just don’t know what she can do from Ireland... if this was an inheritance case in Ireland I could understand that it would be useful for her to get a solicitor but the action is happening mostly in Germany where the executor lives...

Marcusm

Jim2007 wrote: »

In German law it forms part of the estate and the executor is required to ensure that the taxes are paid.



She is Irish resident and taxable in Ireland, so yes she needs to report it and confirm this to the German executor.

Whether it forms part of a German estate will also depend on the location of the insurer, the law under which the policy was governed and a myriad of other potential factors for people who do not or did not always live in Germany! It may form part of the estate in another country or nowhere if, for example, the insured could never have benefited under the policy.

whydoibother

My friends uncle lived in Germany most of his life - he was nearly 100 when he died.
My friend has been living in Ireland for the last 20 years.
The executor now mentioned shares as well in the value of 70,000 euro. He said she needs to have a special type of bank account to get these shares - it sounds very complicated, but from my calculations she will have to give 60,000 Euro to the tax office in Ireland alone. The executor says they will try to get some money back from the 20,000 that German insurance is going to take.
He was like a father to her but of course that does not matter. She says she doesn’t really care about the money. I just thought I’d ask to get better informed abs because I’m surprised that in Germany tax is 20% but in Ireland it’s 33%... it’s a lot of money.

Marcusm wrote: »

Whether it forms part of a German estate will also depend on the location of the insurer, the law under which the policy was governed and a myriad of other potential factors for people who do not or did not always live in Germany! It may form part of the estate in another country or nowhere if, for example, the insured could never have benefited under the policy.

Marcusm

whydoibother wrote: »

My friends uncle lived in Germany most of his life - he was nearly 100 when he died.
My friend has been living in Ireland for the last 20 years.
The executor now mentioned shares as well in the value of 70,000 euro. He said she needs to have a special type of bank account to get these shares - it sounds very complicated, but from my calculations she will have to give 60,000 Euro to the tax office in Ireland alone. The executor says they will try to get some money back from the 20,000 that German insurance is going to take.
He was like a father to her but of course that does not matter. She says she doesn’t really care about the money. I just thought I’d ask to get better informed abs because I’m surprised that in Germany tax is 20% but in Ireland it’s 33%... it’s a lot of money.

Life insurance of 20k plus shares of 70 could never equal a CAT liability of 60k.

whydoibother

Marcusm wrote: »

Life insurance of 20k plus shares of 70 could never equal a CAT liability of 60k.

It’s 100k inheritance plus 70k of shares = 170,000 x 33% Irish tax and 20% German tax = 56k Irish plus 34k German = 90k so it’s liability is actually more than you think.

Esel

I'm sure Ireland and Germany have a Double Taxation Agreement. If so, she should get an allowance for tax paid in the other state.

whydoibother

whydoibother wrote: »

It’s 100k inheritance plus 70k of shares = 170,000 x 33% Irish tax and 20% German tax = 56k Irish plus 34k German = 90k so it’s liability is actually more than you think.

You’re only making guesstimates. Get yourself a good accountant with knowledge of EU Law. They’ll be worth the investment in the long run.
The first error in your calculations is you’ve omitted the Tax Free allowance.

whydoibother

whydoibother wrote: »

It’s 100k inheritance plus 70k of shares = 170,000 x 33% Irish tax and 20% German tax = 56k Irish plus 34k German = 90k so it’s liability is actually more than you think.

There is also the Group B tax free threshold of 32,500 (if she hasn’t got gifts/inheritances in the past) is that would take 32500 off the taxable amount.

whydoibother

[Deleted User] wrote: »

You’re only making guesstimates. Get yourself a good accountant with knowledge of EU Law. They’ll be worth the investment in the long run.
The first error in your calculations is you’ve omitted the Tax Free allowance.

The tax free allowance has already been applied when she got the life insurance. Now they’re dealing post tax free allowances!

whydoibother

Harrison Uneven Plank wrote: »

There is also the Group B tax free threshold of 32,500 (if she hasn’t got gifts/inheritances in the past) is that would take 32500 off the taxable amount.

That’s been applied to the life insurance which she received earlier this year.

whydoibother

[Deleted User] wrote: »

You’re only making guesstimates. Get yourself a good accountant with knowledge of EU Law. They’ll be worth the investment in the long run.
The first error in your calculations is you’ve omitted the Tax Free allowance.

No, you’re wrong. Tax free allowance has already been applied to the life insurance earlier this year. Now it’s all inheritance taxes at 33% in Ireland and 20% Germany and she’s in luck if their own country of birth doesn’t want a bit too.
Also there’s no (ZERO) agreement between Irish and German inheritance tax in case you think there is!

whydoibother

Esel wrote: »

I'm sure Ireland and Germany have a Double Taxation Agreement. If so, she should get an allowance for tax paid in the other state.

Nope, there is no agreement. We’ve checked with the tax office.

whydoibother

whydoibother wrote: »

No, you’re wrong. Tax free allowance has already been applied to the life insurance earlier this year. Now it’s all inheritance taxes at 33% in Ireland and 20% Germany and she’s in luck if their own country of birth doesn’t want a bit too.
Also there’s no (ZERO) agreement between Irish and German inheritance tax in case you think there is!

I’m not claiming anything. Just suggesting that your friend seeks professional advice as inheritance tax is a minefield!

banie01

[Deleted User] wrote: »

I’m not claiming anything. Just suggesting that your friend seeks professional advice as inheritance tax is a minefield!

With friends like the OP, the inheritor doesn't need professional advice at all...
Sure they already know everything, their arithmetic is impeccable and their understanding of how TFA's work even more so.
Couple that with their ability to differentiate between father and uncle

On a serious note, an appointment to see a tax advisor will cost the OPs friend far less in both money and worry than listening to their "help".

@OP tell your friend see a Tax advisor and stop offering advice on things you quite clearly have zero competence in.

whydoibother

Thank you so much for your so very learned opinion.
We really needed your input/advice.
Lots of love to you too.

banie01 wrote: »

With friends like the OP, the inheritor doesn't need professional advice at all...
Sure they already know everything, their arithmetic is impeccable and their understanding of how TFA's work even more so.
Couple that with their ability to differentiate between father and uncle

On a serious note, an appointment to see a tax advisor will cost the OPs friend far less in both money and worry than listening to their "help".

@OP tell your friend see a Tax advisor and stop offering advice on things you quite clearly have zero competence in.

banie01

whydoibother wrote: »

Nope, there is no agreement. We’ve checked with the tax office.

Your research skills leave much to be desired.
https://www.taxfind.ie/document/http___www_revenue_ie_en_tax_professionals_tax_agreements_double_taxation_treaties_g_germany_1962_pdf_20170718233053-top_doc-4203533501

That's the 1st of a series of such agreements.
Latest was in 2011
https://merrionstreet.ie/en/Category-Index/Economy/Taxation/double-taxation-agreement-signed-between-ireland-and-germany.html

There is an agreement in place, advise your friend to seek professional advice.
For the sake of their wallet and their peace of mind, stop giving them advice.

whydoibother

And by professional advice, who do you mean? We’ve contacted a Financial
Advisor but she said what we already knew. There’s two countries taxing and no real agreement in place. What they do is they both tax and then Germany had to give back part of the money taxed.
Who would you advise us to contact then?

banie01 wrote: »

Your research skills leave much to be desired.
https://www.taxfind.ie/document/http___www_revenue_ie_en_tax_professionals_tax_agreements_double_taxation_treaties_g_germany_1962_pdf_20170718233053-top_doc-4203533501

That's the 1st of a series of such agreements.
Latest was in 2011
https://merrionstreet.ie/en/Category-Index/Economy/Taxation/double-taxation-agreement-signed-between-ireland-and-germany.html

There is an agreement in place, advise your friend to seek professional advice.
For the sake of their wallet and their peace of mind, stop giving them advice.

banie01

whydoibother wrote: »

And by professional advice, who do you mean? We’ve contacted a Financial
Advisor but she said what we already knew. There’s two countries taxing and no real agreement in place. What they do is they both tax and then Germany had to give back part of the money taxed.
Who would you advise us to contact then?

You have been linked to the agreements.
You have been advised to tell your friend seek an appointment with a Tax Advisor.

You would think that given how recently you sought advice for yourself when you were in a similar inheretence situation albeit with an aunt(or was it mother? Given the earlier confusion?)
https://touch.boards.ie/thread/2058089843/1/#post113830083
That you would be better placed to offer your friend actual competent advice.
You aren't, you need a competent tax advisor.
In case the repetition of the requisite professional's job title still hasn't sunk in for you?
It is Tax Advisor.