Concerns over inheritance tax bill

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bannowjoe

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Hi,

I’m seeking some advice on behalf of a relative who has serious concerns over inheritance tax and tax bill they are facing, scenario is quite complex and would be grateful for any input

Uncle in family who is now on his deathbed with cancer had made will leaving entire estate of whatever means to two nephews to use as they wish.

Estate consists of house worth 700000 and cash assets at approx 500000

Nephew one has been living in house for past year as uncle had gone into nursing home, uncle wanted nephew 1 to live in and then have house and nephew 2 to take cash however his will doesn’t explicitly state that so The two nephews were going to draw up a deed of family arrangement so one would take house and one would take cash on uncles passing HOWEVER nephew one had been hoping to avail of dwelling house relief, now that uncles passing is imminent and he has only lived in house for a year he will not be able to avail of this rellief as exemption states he must have lived in house 3 years prior to and 6 years after relatives passing so he is facing a cat bill of 33% on 700000 = 230000

He accepts that he will have to sell the house to clear the bill as he has nowhere near that money and this is where the serious concerns arise

The house while in theory is valuable is an old protected structure and it appears that uncle had made some minor adjustments to inside house while living there and by right should have received planning permission however when i say minor adjustment i mean painting and replacing two old doors which had rotten through. The concern with that is the house may not sell quickly.

What happens in a case where to pay inheritance tax a house must be sold but house will not sell on open market? Do revenue tag on interest if sale of house drags out etc, nephew is up the wall that he will face 230000 bill plus penalties, is there any compromise/way out of that situation?

We will be seeking professional advice but thought would also ask question here

Thank you
 
Thank you for the reply, it is certainly something to consider yet not desirable by nephew, is there any leeway with revenue on matters like this, i read something about a one year deferement possibly given if relying on sale of house to pay cat?
 
Why don't the use some of the cash assets to pay the inheritance bill and then share out the proceeds of the house sale when that occurs.

This would certainly concentrate their mind when it comes to selling the house, as they won't touch much of the inheritance until it is sold.
 
jpd said:
Why don't the use some of the cash assets to pay the inheritance bill and then share out the proceeds of the house sale when that occurs.

This would certainly concentrate their mind when it comes to selling the house, as they won't touch much of the inheritance until it is sold.
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It’s a very good point and one i had suggested and I believe this is the fairest thing to do but this is where another issue has come up, they made an agreement between themselves and uncle that if nephew 1 moved into the house which he already has he would take responsibility and benefit of house and nephew 2 would take cash on uncles passing and this would be done through deed of family agreement, nephew 2 is sticking to that agreement and is holding that over his brother so basically nephew 2 share of will would be cash of 500000 which he will pay his cat from but is stating sale of house and it’s cat liability is not his problem rather the problem of nephew 1s who if he sticks to their agreement has no cash assets and has to come up with 230000 which he may not raise through sale of house as it could be difficult to sell with above mentioned possible planning problems.
 
yes, but on the other hand, he is getting an asset worth 700,000 (less CAT @ 33% = 469,000) whereas his brother/cousin is "only" getting 500,00 (less CAT @ 33% = 335,000) - I know, I have ignored the tax-free threshold of € 32,500
 
jpd said:
yes, but on the other hand, he is getting an asset worth 700,000 (less CAT @ 33% = 469,000) whereas his brother/cousin is "only" getting 500,00 (less CAT @ 33% = 335,000) - I know, I have ignored the tax-free threshold of € 32,500
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Yes Indeed, that’s what nephew 2 is getting at as in He agreed to take less of an inheritance so he wouldn’t have to deal with or worry about the house however I believe he is being shortsighted as if they agree to 50/50 split now they can both pay their cat from cash assets and he will have a greater share of inheritance once house sells, I believe their fears over house not selling are not realistic as it’s in a very good area and any works that had been done by uncle without pp are extremely minor (changing old doors that were rotten and removing wallpaper) yes it is a protected structure and I understand there are strict regulations around those houses but I cannot fathom the House not selling because of such minor adjustments as as I said it’s in a very good area, thank you for your feedback much appreciated, any other insight am all ears!
 
This is all very unseemly. How do the nephews know exactly what is in the will? Who is the executor?

As two brothers have no legal arrangement in place, then the executor will sell the house, divide up the assets and pay the taxes and debts.

Uncle should have divided his estate better to avoid handing so much to the tax man.
 
Bronte said:
This is all very unseemly. How do the nephews know exactly what is in the will? Who is the executor?

As two brothers have no legal arrangement in place, then the executor will sell the house, divide up the assets and pay the taxes and debts.

Uncle should have divided his estate better to avoid handing so much to the tax man.
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Both nephews are joint exectuors and joint beneficiaries, nothing unseemly rather a failure to understand tax implications of certain decisions, the legal arrangement they wish to put in place is the deed of family arrangement, the issue is really around the cat bill for nephew one who will rely on sale of house to pay this bill and what leeway revenue give if a house in theory does not sell.
 
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