Taxation within Estates

Capital Acquisitions Tax (CAT)

CAT may arise on inheritances.

This is dependent upon thresholds below which CAT will not need to be paid. The thresholds for children are much larger than for other classes of person. Please also note that aggregation applies to inheritances so that previous gifts received by a beneficiary can affect their threshold.

Property taken from a spouse is exempt from CAT. The Principal Private Residence exemption is available in some circumstances. Another important relief is Agricultural Relief.

In relation to CAT,  where beneficiaries are located outside of Ireland, there will be secondary liability placed upon the Personal Representatives in relation to whatever CAT needs to be paid. Where the Personal Representatives and the Beneficiaries are all located abroad then there will be secondary liability upon the solicitor acting in relation to the Estate.

The deadline for the filing of returns and paying of tax for CAT is:-

  • 31 October if valuation date is between 1 January and 31 August of the same year
  • 31 October in the following year if the valuation date is between 1 September and 31 December in the previous year.

Capital Gains Tax (CGT)

While inheritance does not give rise to CGT, it is the case that CGT arises where there is a rise in value between the date of death and the ownership changes from the situation that arose upon the death of the deceased by transfer or sale. An accountant should be consulted with in relation to any CGT matters including in relation to pay and file deadlines, which will generally be 31 October of the year following the year in which the gain is made.

In relation to CGT, where a disposal is by the Personal Representatives they will pay any CGT as part of the administration of the estate.

Stamp Duty

The passing of assets on death does not attract stamp duty. An alteration of ownership post death by sale or post death alteration between beneficiaries will give rise to stamp duty. However, this is payable by the purchaser or transferee rather than the estate.

Income Tax and pre-death CGT of the deceased

Where there are such issues in relation to the deceased, the Personal Representatives and Beneficiaries should consult with an accountant.

FAQs

The following are  some questions raised by clients with general replies only. The correct replies in any particular case will depend on the circumstances of that case.

What is the tax effect of an inheritance being received by a child under 18 under a normal bare trust?

While it is the case that a person under 18 cannot give a receipt for that inheritance until they are 18, the child is deemed to inherit the asset at the date of death of his parent and is taxed accordingly.

Are the Funds received under a Credit Union Nomination subject to Capital Acquisitions Tax (CAT) rules?

Yes the CAT rules apply including thresholds.