CAT Across Countries

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DubhRi

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I would be very gratefull if anyone could shed some light on a matter for me.

My sister passed away recently without making a will. This is not a difficulty as my other siblings and I are quite happy for her assets to be shared between our parents.


Some of the assets were in the U.S. (New York)
A house and a life insurance policy

Some of the assets were in Ireland, agricultural land primarily and a work life insurance policy.


I am now in a position where I am trying to wade through this quagmire.
There are a number of bank accounts in both countries and numerous credit cards in both, as well as various stocks and bonds.


The domicile could be taken as NY as that was the residence for the past 5 years and tax returns had been filed there. She was a contractor and had set up a company in NY to avail of tax benefits.


I am aware of a $3.5million tax inheritance threshhold in NY with 45% being taken on the excess.

I am aware of €868,000 being the joint threshold for my parents under the Irish CAT system with the excess being taxed at 25%

With the above in mind could anyone answer the following questions for me or perhaps point me in the right direction ?

  1. Will either country try to claim the entirety of the estate for taxation purposes ?
  2. Does the double taxation / bi-lateral taxation agreement hold sway in these circumstances ?
  3. Can the assets be split between the 2 countries and the applicable taxation in each used (along with the tax free threshold), and if so what would be the ramifications of liquidising the US assets and lodging them in an Irish Bank?
  4. Would the US life insurance policy be eligible for taxation in either country?
  5. Would the work life insurance policy be eligible for taxation in either country?
Again if anyone could help me with the above I would be very gratefull.
 
DubhRi said:
I would be very gratefull if anyone could shed some light on a matter for me.

My sister passed away recently without making a will. This is not a difficulty as my other siblings and I are quite happy for her assets to be shared between our parents.


Some of the assets were in the U.S. (New York)
A house and a life insurance policy

Some of the assets were in Ireland, agricultural land primarily and a work life insurance policy.


I am now in a position where I am trying to wade through this quagmire.
There are a number of bank accounts in both countries and numerous credit cards in both, as well as various stocks and bonds.


The domicile could be taken as NY as that was the residence for the past 5 years and tax returns had been filed there. She was a contractor and had set up a company in NY to avail of tax benefits.


I am aware of a $3.5million tax inheritance threshhold in NY with 45% being taken on the excess.

I am aware of €868,000 being the joint threshold for my parents under the Irish CAT system with the excess being taxed at 25%

With the above in mind could anyone answer the following questions for me or perhaps point me in the right direction ?

  1. Will either country try to claim the entirety of the estate for taxation purposes ?
  2. Does the double taxation / bi-lateral taxation agreement hold sway in these circumstances ?
  3. Can the assets be split between the 2 countries and the applicable taxation in each used (along with the tax free threshold), and if so what would be the ramifications of liquidising the US assets and lodging them in an Irish Bank?
  4. Would the US life insurance policy be eligible for taxation in either country?
  5. Would the work life insurance policy be eligible for taxation in either country?
Again if anyone could help me with the above I would be very gratefull.
Click to expand...

Is this an exam question dear? Sounds like one! However if your sister died, my condolences.

AFAIK, a person domiciled in the US is liable to Inheritance Tax and Federal Estate tax on all assets worldwide.

Because the parents are resident in Ireland, they too are taxed in Ireland on all assets worldwide.

Double Tax credits are available in the US for the Irish Tax on the Irish situated property and in Ireland for the US tax on the US property. In effect the overall tax bill will be whatever the higher rate of effective tax is in either country on all assets.

Liquidising assets is useless, as Probate is based on the situation of the assets at the date of death. Now not being familiar with US law, this might be permissable, but I doubt it. Anyway, with both countries having full taxing rights over all property it is a waste of time IMO.

There is a provision in the US.Ireland DT Treaty that states certain property is deemed to be situated in the place of domicile, i.e. bank accounts, and insurance policies, and certain shares, but that is only pertinent where the person was not domiciled in the country where these assets are situated, and where the taxing rights are not based on the residence of the beneficiary like Ireland. No good moving the bank accounts to Ireland in this case.

I am probably completely wrong in this, am recalling from studies years ago.
 
Thank you for your help 4th Estate.


If only it were an exam question :(
 
Firstly, condolences on the loss of your sister.

Secondly, the matters concern inheritances and taxation in 2 jurisdictions. Given the diversity of the issues you mention, and the possible tax implications of proceeding incorrectly, I would strongly recommend that you engage the services of a tax consultant with IRL/US experience. The Irish Taxation Institute have a list of members at
 
Thanks Graham, I reckon thats probably the safest course of action as already I've been getting conflicting info from the us based attorney who closed on her us property.

I haven't given him any instructions yet though so I might find someone else whose primary concerns don't focus around their fees etc. One of the first lines out of his mouth apart from a perfunctory sorry was:

"I charge x amount per hour and it will cost at least x k to process this, this is much cheaper than most attorney's operating in NY".

Needless to say this didn't leave me with a particularly good taste in my mouth.
 
I can reccommend a good US attorney based in London.
I used to work with him several years ago. He would be very au-fait with double taxation, although mainly with US/UK issues, but would be able to deal with the US side for you.

PM me if you want his contact details.

www.taxingtimes.ie
 
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