Son dies lparents inherit estate tax implications

d7guy

Hi all, a cousin of mine died ,while on holiday ,he had a small property in Turkey which his parents inherited and are looking to sell and repatriate the money back to Ireland. What are the tax social welfare implications for them.

Their son was single no children and lived at home in his parents house , both parents are pensioners, thanks in advance

Jim_Hodge

Have a look here . https://www.citizensinformation.ie/en/money-and-tax/tax/capital-taxes/capital-acquisitions-tax/#2d5ff5

They may come under the exemption for Group A but I suspect they are Group B.

SW benefits depends on what pensions they are receiving.

downtheroad

https://www.boards.ie/discussion/comment/122272014#Comment_122272014

Why would Group A not apply? "Group A also applies to parents who take an inheritance from their child but only where the parent takes full and complete ownership of the inheritance."

The parents have inherited an absolute interest from a child. That meets the criteria

OP sorry for your family's loss. You may need to consult a Turkish tax advisor to see what local tax, if any, applies as the property is situate in Turkey.

d7guy

Thank you guys for your replies and condolences. As regards pensions ,one is on old age pension and the other is on disability. All local Turkish taxes to date have been paid in full.

Peregrinus

If the pensions are means-tested then the value of the inheritance to which the parents are entitled (net value, after deduction of all Irish and Turkish taxes and payment of the expenses of administering the estate and selling the property) will be taken into account in assessing whether they still qualify for the pension. They are obliged to inform the Dept of Social Protection of the change in their circumstances.

If the pensions are secured by social insurance contributions then the inheritance will have no consequences for the pensions.

Jim_Hodge

https://www.boards.ie/discussion/comment/122272173#Comment_122272173

I said they may be Group A, but there are conditions which your quote stops short of.."If a parent inherits from their child, and they have full and complete ownership of the inheritance it is exempt from tax if, in the previous five years, the child took an inheritance or gift from either parent and it was not exempt from Capital Acquisitions Tax." Otherwise it's Group B.

d7guy

Thanks again for the advice, as far as I know both parents were just ordinary P.A.Y.E. workers ,no other sources of income…private pension /property etc..

No "gift" was given in the last 5 years to their son.

BhoyRayzor

If either parent gifted the son anything over €3k in the last 5 years then the criteria is met for the inheritance being fully exempt.

d7guy

They did give him a small loan around that amount...but nothing "officially " declared .

Jim_Hodge

https://www.boards.ie/discussion/comment/122285118#Comment_122285118

No good. CAT wasn't paid.

https://www.boards.ie/discussion/comment/122280932#Comment_122280932

Finish that condition….CAT had to have been paid at the time.

flatty

Quick question. My pal is fairly wealthy and is moving back to Ireland from the Uk. He has a relatively expensive house in the UK mortgage free, and a relatively expensive holiday house on relatively expensive land in Ireland. Would he be better putting them in his kids names (one in each) before he becomes resident in Ireland?

Peregrinus

https://www.boards.ie/discussion/comment/122285194#Comment_122285194

Not quick at all, because there are a couple of different taxes in a couple of different jurisdictions to consider. Also you omit relevant information; in what jurisdiction are the kids resident? And, is the house in the UK your pal's principal private residence? And, does he intend to live in the Irish property, up to now a holiday home, when he moves back to Ireland?

flatty

The UK house is his main residence at present. One child is in full time education in Ireland, and the other in England. His wife is in England still full time working resident.

The house in Ireland isn't finished yet, but he plans to move in around Halloween when it is.

He's sleeping on his parents floor at the minute.

Peregrinus

If either or both of his kids are still of school age, it is madness to think of transferring valuable properties to them. It will cause considerable practical problems and present not a few risks. But park that for a minute and lets pretend his kids are adults, and the kind of people who can be trusted with the ownership of assets worth hundreds of thousands of euros.

If the UK property has, up to now, been his principal private residence, he can transfer it to one of his kids without incurring any liablity to capital gains tax. If he transfers it to the UK-resident child, SFAIK there is no gift tax or similar payable in the UK, but if he dies within 7 years of making the gift, then some or all of the value of the gift will be taken into account in calculating any inheritance tax liability that the UK-resident child may have. If he gives it to his Irish-resident child then Irish CAT applies in the usual way.

The Irish property is not his principal private residence, so if he disposes of it - whether by selling it or gifting it - he may incur a liablity to capital gains tax (if it has appreciated in value since he acquired it.

If he gives it to either child then, because it is Irish property, Irish CAT applies in the usual way, regardless of the residence of the child.

BhoyRayzor

https://www.boards.ie/discussion/comment/122285186#Comment_122285186

By whom? If either parent gifted the son €3,001 or more, i.e. a non-exempt gift, in any of the previous 5 years then they are exempt from CAT on the inheritance from the son.

https://www.irishstatutebook.ie/eli/2003/act/1/section/79/enacted/en/html

Lenar3556

https://www.boards.ie/discussion/comment/122285186#Comment_122285186

https://www.boards.ie/discussion/comment/122285186#Comment_122285186

My understanding is that the Group A threshold will apply in all cases, as long as an “absolute interest” is passing to the parents. In this case, that element wont be at issue, and a small property in Turkey quite possibly won’t exceed the €335k threshold. In which case no CAT will arise.

The question of an inheritance being outright ‘exempt’ from CAT is a separate matter, and this is where the previous non exempt benefit passing from parent to child arrises. This could be significant in the case of a large estate, but isn’t relevant where the estate is under the €335k threshold.

BhoyRayzor

https://www.boards.ie/discussion/comment/122285118#Comment_122285118

Did he officially pay it back? It could have actually been a non-exempt gift.

TAC ruled against Revenue in a case where cash was withdrawn by the father and seemingly given to the son as a birthday present with no official paper trail of lodgement to an account.

https://www.taxappeals.ie/en/determinations/33tacd2018-%E2%80%93capital-acquisitions-tax

flatty

If it is a new build properly, how does CAT work do you know?

PS, he is extremely grateful for your concise and informed thoughts on this.

Peregrinus

https://www.boards.ie/discussion/comment/122300392#Comment_122300392

Being a new build property is irrelevant. All that matters for CAT purposes is the value of the property on the date the parents inherit it. Doesn't matter whether it was built last week or last century.

Marcusm

https://www.boards.ie/discussion/comment/122285186#Comment_122285186

I don’t think any CAT has to have been paid; it needs to have been a “non-exempt” gift, ie not one necessarily in excess of the threshold but one which would have been taken into account in determining whether a threshold is breached (so not maintenance of a minor child or an incapacitated individual nor one which fell under €3k exemption).