Can we decide how to split intestate estate

[Thermo1]

My parents are deceased, my father most recently died intestate. His estate consists of an inactive farm and the family home. Neither myself or either of my two siblings live in the family home or were involved in the farm.

I understand that under the Succession Act myself and my 2 siblings inherit an equal share of our fathers estate. However we are struggling to decide on how to split the estate equally. There is a reluctance to sell the house and land, but nobody wants to sell their third to another sibling/other siblings don't really have funds to buy each other out.

Can we decide amongst ourselves to carve up the estate into 3 portions for each beneficiary e.g. house to one sibling, land split between two siblings?

And if so, what are the pitfalls? Each portion might not have an equal value, does this matter if each sibling agrees?

 

[ClubMan]

Any use?

Marital status and inheritance

This page describes how being married affects your inheritance rights.

www.citizensinformation.ie

Deed of variation

A deed of variation (also known as a deed of family arrangement) is a legal document that allows beneficiaries to rearrange or vary the entitlements due to them. For example, the beneficiaries may decide that all or part of their entitlement should be redistributed to their children (the next generation), siblings, friends or charity. It is important to get legal and financial advice before deciding to use a deed of variation as there may be tax implications for you and the person receiving the benefit.

 

[Dr Strangelove]

There is a reluctance to sell the house and land

This is more of a human problem than a legal problem.

carve up the estate into 3 portions for each beneficiary e.g. house to one sibling, land split between two siblings?

This looks like very value destructive. Two land parcels are worth less than one. Likewise a farmhouse without adjacent farmland.

Add to this presumably access issues you would have to resolve at a future point.

 

[TomEdison]

Can we decide amongst ourselves to carve up the estate into 3 portions for each beneficiary e.g. house to one sibling, land split between two siblings?

Assuming you are all adults, fully mentally competent, etc, yes, you can. But it needs to be unanimous agreement; a two-one vote won't do it.

And if so, what are the pitfalls? Each portion might not have an equal value, does this matter if each sibling agrees?

Tax. If you carve up the estate, say, 45% - 30% - 25%, then Mr 45% is getting a gift of a 3.33% share in the estate from Mr 30%, and a second gift of 8.33% from Mr 25%. CAT will apply to these gifts in the usual way, (Unless Mr 45% pays his brothers for the value of these in cash.)

Plus, the non-trivial risk of later emotional and, possibly, legal complications if e.g. Mr 25% later realises he got a bad deal, and reckons he was pressured into it/wasn't given full information/didn't realise what he was giving up, etc. The usual way to guard against this becoming a problem is to ensure that the three siblings are separately legally advised in relation to the transaction, which is expensive. Plus, it's a good protection against legal complications but not against emotional complications.

 

[misemoi]

Why the reluctance to sell? Will this land and house get left unused like it is now for many years to keep an emotional attachment? Most farmers would have wished for farmland to be kept in the family but not left derelict to do so. If none of you were involved in the farm, what were your parents wishes should you want to carry them out ?

Is there any appetite to maintain ownership and lease the land to generated shared income ? Some income might be able to be made from renting the house out, though that is more work but can be solved by appointing a competent agent.

Does anyone else in the family eg nieces or nephews show aptitude or interest in farming or in using the land in some way eg forestry that might make it worthwhile to delay a sale until such a time as they could afford to buy it?

 

[T McGibney]

If you carve up the estate, say, 45% - 30% - 25%, then Mr 45% is getting a gift of a 3.33% share in the estate from Mr 30%, and a second gift of 8.33% from Mr 25%. CAT will apply to these gifts in the usual way, (Unless Mr 45% pays his brothers for the value of these in cash.)

That's not correct if a deed of family arrangement is properly completed.

 

[TomEdison]

That's not correct if a deed of family arrangement is properly completed.

I'm aware that a Deed of Family Arrangements, executed within two years of the death of the deceased, is not regarded as a disposal for CGT purposes, but is there a look-through provision in the CAT legislation as well? Or published revenue guidance on the question?

 

[T McGibney]

I'm aware that a Deed of Family Arrangements, executed within two years of the death of the deceased, is not regarded as a disposal for CGT purposes, but is there a look-through provision in the CAT legislation as well? Or published revenue guidance on the question?

You'll have to look it up yourself I'm afraid but I have dealt with a number of these in the recent and relatively recent past and there is no CAT implication whatsoever arising from the agreed variation facilitated by the deed.

You shouldn't be suggesting otherwise without full knowledge as Deeds of Family Arrangement are often a last resort to avert what would otherwise be a terrible mess.

 

[TomEdison]

You'll have to look it up yourself I'm afraid

Well, encouraged by this I have looked it up myself. And — please don't take this the wrong way — I can't find any confirmation of your view.

I haven't found anything at all on revenue.ie that addresses the question of the CAT consequences of a deed of family arrangement — nothing ton confirm your view; nothing to refute it. There's plenty on the CGT consequences of a DFA; nothing at all on the CAT consequences.

(Which, I have to admit, is a bit odd. There's a distinct possibility that there is something on the site, but I have failed to find it.)

But I also can't find any secondary source — commentaries, etc — that confirms your view. I have found some that contradict it.

In particular, here's the Minister for Finance, in 2018, telling Dáil Éireann that . . .

. . . a re-distribution of assets received by family members under a deed of family arrangement gives rise to two potential charges to capital acquisitions tax; i.e.

1. a potential inheritance tax charge for the original beneficiary on his or her inheritance from the deceased person, and

2. a potential gift tax charge for the beneficiary receiving the asset under the deed of family arrangement from the original beneficiary.

And he adds that he has no plans to make any changes to that treatment.

OK, that was seven years ago. Things could have moved on from then. And you practice in this area, and so have experience that I don't. So I take very seriously your assurance that this is not how things work now. But, still, I really would like to know why it's not.

I've alwasy understood that there's a distinction between:

- a beneficiary renouncing an entitlement, in which case the entitlement falls back into the estate and passes to whoever is next entitled under the will or, if there is no will, under the rules that apply on intestacy; in this case the next beneficiary is regarded as having inherited from the deceased; and

- beneficiaries agreeing among themselves to vary the allocation of assets that would result from the terms of the will/the rules of intestacy; in this case those who benefit from the variation are treated as receiving a gift from those who have agreed to give up entitlements.

The key difference is that in one case someone simply renounces an entitlement and lets the terms of the will/the rules on intestacy operate; in the other a benefit is directed to someone who wouldn't get it under the terms of the will/the rules on intestacy.