A question about inheritance tax and a house

Donal55

Registered User
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Probably like many people at this present time I am suddenly more conscious of both my mortality and my responsibilities and I want to update my will but do not have a family solicitor as the one we used for decades has retired. Obviously when non-essential movement becomes possible again after this pandemic has passed and business reopen then I will go to a new solicitor and have a new will properly drawn up. But for now I am trying to draw up a document based on the wording of my previous will made over twenty years ago when my daughters were small and my wife still alive.
I want everything to go to my two daughters but I have some questions about inheritance tax. These should be clear to me after he many legal sites I have visited tonight, but I find that these sites phrase information in a way I find slightly confusing in its generality, whereas I always enjoy reading the advice given freely here by members because it directly addresses the question being directly asked.
I understand that my daughters both have inheritance threshold of €335,000 before they start to pay inheritance tax, but one younger daughter has always lived with me at home whereas the older daughter has lived abroad for several years and has a home there. I am anxious for my younger daughter to still be able to continue to live in the family house where she has always lived if anything happens to me.
Am I correct in thinking that if I leave her the house (which was worth €425,000 two months ago, although God knows what will happen to house prices in the coming months) then she will not have to pay inheritance tax on it (i.e. she would not have to raise €30,000 to pay 33% of the €90,000 price difference between her limit of €325,000 and the estimated house price of €425,000). And that this applies if:
1: The house is the only or main home of the person who died (i.e. me and I own no other property).
2: She has lived in the house as her main home for the three years before my death.
3: She does not own, have an interest or a share in any other house, including any other house acquired as part of the same inheritance (of which there would be none).
4: The house remains her main home for six years after she receives the inheritance.
This all seems clear on the various websites, but some sites give other qualifying criteria, such as stating that she must be a dependent relative of the person making the gift and must be permanently and totally incapacitated due to a physical or intellectual disability and unable to earn a living.
Am I correct in thinking that this addition stipulation only applies to a gift that I give to someone when I am still alive and does not to apply to a house inherited after I die. There was also some further stipulation on some other site about me having moved out of the house for a period of three years before my death, but again I think this may relate to a house being a gift and not an inheritance.
Sorry for the length of this post, but can I come to the two other questions that I would really welcome advice on.
1: I have some other small savings but a very good life insurance policy and so I would be able to leave my older daughter abroad the cash equivalent of the value of the house back in Ireland left to her sister. But should I state in my will that I am leaving her a sum equal to a valuation of the house, as valued by a respected independent auctioneer, or am I wiser to rule out any ambiguity by putting down an exact sum in the will (like, say, €425,000). My older daughter might be disadvantaged compared to her sister in that she will have to pay 33% on the final €90,000 on this, but perhaps she would also be advantaged in that the value of the house might fall in this climate whereas the lump sum mentioned is fixed.
2: After leaving the house to one daughter and a cash equivalent to the other daughter, there is likely to be very little left in the kitty, but if there is a small sum left in my estate, am I right in thinking that my youngest daughter will still have an untouched inheritance tax allowance that she can use to offset any addition sum that might come to her, or if she has already been left a house that is valued at more than her tax free threshold, does this mean that her tax free inheritance tax threshold has now been used up when she was left the house?
Thank you all for any advice and, yes, I do know that not only will house prices probably fluctuate wildly in the coming year but also that one of the first things the government nay cut in any new emergency budget may be the inheritance tax threshold, so all these figures may soon be out of date.
But as I have an underlying medical condition that could be affected by the coronavirus pandemic I am just trying to draw up something at short notice to cover the here and now and will get proper legal advice and a will professional drawn up when the world hopefully returns to normal. Thank you.
 

mathepac

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7,039
Maybe you'd take time to break that huge intimidating slab of text into manageable paragraphs. It'll make more readable and increase your chances of getting a helpful response,
 

Pugmister

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No thats incorrect. What you are proposing for your youngest is the dwelling house relief under its previous guise. It has since been severley restricted and your daughter will be liable to pay CAT on any amounts aboce the category A threshold.

In regards to the will, my advice would be to be as specific as possible in documenting your wishes
 

Donal55

Registered User
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10
Dear Pugmister,

Thank you for your courtesy and your succinct advice as I seem to have misinterpreted the dwelling relief rules which seem to have changed over time and be listed differently on the sites I visited.

If the fact that that my youngest daughter has always lived in the house makes no difference to her inheritance tax threshold and she will have to pay tax on anything left to her over €335,000, then at least it makes the wording of my will simpler as I can include the house in my general estate to be divided equally between my two daughters because no tax advance arises from keeping it separate. Thanks again for your clear advice.
 

RedOnion

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4,271
No thats incorrect. What you are proposing for your youngest is the dwelling house relief under its previous guise. It has since been severley restricted and your daughter will be liable to pay CAT on any amounts aboce the category A threshold
Really?
So someone inheriting a house values a more than the Group A threshold will have to pay CAT, even if they meet all the criteria for exemption?

Do you have a link to any Revenue guidance in this?

Apologies if I'm asking a silly question - there might be something in the OPs circumstances that I missed which means the exemption can't apply. I found the blocks of text difficult to read, so I might be missing something.
 

Pugmister

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90
Apologies i misread the OP scenario and assumed both daughters had vacated the family home. As your younger daughter resides in said house then as long as this continues to be her main residence up until the inheritance takes place (or for at least three years prior) then she may indeed avail of the dwelling house relief.

However if the house was to become a gift to her during youre lifetime the same relief does not reply.
 

Donal55

Registered User
Messages
10
Thanks indeed to Pugmister and everyone else who replied.

As people seem to be have had problems following my original post, I have broken it down to make it more more concise.

1: I need to make a new will as soon as possible as I am in an “at risk” category.

2: I have two daughters and want to leave them equal sums in my estate.

3: My estate consists of A) a house where I live and my youngest daughter has also always lived, which is valued at above the inheritance tax threshold, and B) some bank savings and a life assurance policy that, when encashed, would be just above the value of house (if house prices remain stable).

4: My first question was about whether there was a tax advance to your youngest daughter if I leave her the house (i.e. whether she will not have to pay tax on its value above the current threshold because it has been her sole residence). I would then leave an equivalent sum in cash to my eldest daughter who lives abroad and knows she will have to pay tax of anything above the current threshold. I think this question has now been answered that, provided she has lived there for a certain number of years, she can inherit it free of inheritance tax, but if I gift it to her in my own lifetime she will be taxed.

5: If not tax advantage had arisen then I would not complicate the will by dividing it up in this way and I would just leave everything equally to be shared by both daughters.

6: My second question was about whether, if my youngest daughter was allowed to inherit the house without paying inheritance tax, would she have used up her inheritance tax threshold or would she start from scratch in being able to use her threshold allowance against any other small sum that might remain to be divided up in my estate.

Apologies for my initial post being so unclear. Thank you for the advice.
 

Pugmister

Frequent Poster
Messages
90
Your youngest daughter can inherit the house as long as it is and has been her main residence in the preceeding three years. Currently this criteria is being met. Her category A threshold would remain intact and available to use against additional inheritances.

Additionally there is an annual exemption in which you can give 3k to a person (related or unrelated) annually and this will not impact their thresholds. Might be worth considering if your cash sums are substantial
 

Black Sheep

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2,221
If you wish your daughter to inherit your home surely you would will it to her in the safe knowledge that she has a home of her own when you are no longer around. If she wishes to move elsewhere for work or other reasons she can always do that using the money from the sale of the house. Who knows whether house prices will collapse or skyrocket.

Having your younger daughter living with you must be a great bonus for you especially since your wife passed. You can't put a price on that so perhaps an equal financial split is not always an equal split.

I'm sure your older daughter would greatly appreciate the large cash inheritance
 
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