House was left in will 20 years ago but only being sold now among siblings

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JimmyCorkhill

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Remaining parent died in 2005 and left house in will to 5 kids but had put in will that one of the adult children who was living in the family house could stay in the house till rest of their life.

Fast forward to 2025, child who was allowed stay in family house (didn’t pay any rent to siblings but paid any maintenance and bills etc) moves into a nursing home and has agreed with siblings to sell house.

House in 2005 was worth say 500k at time of death of parent and now has been sold for €1m in 2025.
Same child who lived in family house since parent passed and always lived in the family home also has an investment property (apartment) they bought over 30 years ago but the family home was where they always resided.

What tax or related considerations should one be aware of in this situation?

Ignoring the sibling who stayed in the house for the whole time, for the remaining 4 siblings would they be entitled to 1/5th (tax free) of the value of the house in 2005 (100k) and for the increased value of the house from 2005 to 2025 (+500k or 100k each) would they have to pay CGT of 33% on that?

For the sibling who stayed in the house all along and has also owned an investment property (that they never lived in), are they treated the same as the other siblings or would they be treated differently if the family home was their PPR or would the family home not be considered their PPR.

Who would be best to get advice on ensuring everything runs smoothly in terms of taxes, declarations etc. A tax accountant over a solicitor or a general practice accountant?

Thanks
 
I am not a tax expert, but this is what I think will happen.

JimmyCorkhill said:
for the remaining 4 siblings would they be entitled to 1/5th (tax free) of the value of the house in 2005 (100k) and for the increased value of the house from 2005 to 2025 (+500k or 100k each) would they have to pay CGT of 33% on that?
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Proceeds of sale: €200k
Cost: €100k
Capital Gain: €100k
Less annual exemption
Tax @33% = c. €33k

JimmyCorkhill said:
House in 2005 was worth say 500k
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Why "say" €500k? The value will have bee set out in the Probate. So if it was valued at, say, €300k, your CGT bill now will be higher.
 
JimmyCorkhill said:
Who would be best to get advice on ensuring everything runs smoothly in terms of taxes, declarations etc. A tax accountant over a solicitor or a general practice accountant?
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A tax specialist.

Most accountants in practice will know this stuff or will refer to a specialist if they don't.

Some solicitors also have tax qualifications. But most don't. And some give tax advice when they don't know what they are talking about.
 
House sells for 1 mil
Siblings 1-4 get €200K each
Original value of their portion €100K
Sale fees - say €2K each
Chargeable gain €98K
Personal exemption €1270
CGT €31,921
They each get €170K from the sale.

They should not need any special advice unless they have other CGT reliefs.

Sibling 5 in the nursing home may need fair deal so more complex for them. They would not pay CGT on the house but would on the apartment when they sell.
 
I have been in a similar situation.
Relation died, intestate, house left unoccupied for 10 years... neighbours were going crazy.

Be careful of the differences ... selling date, valuation date.
The tax accountant used a few allowances... CAT / CGT.
 
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You definitely need advice from a competent tax professional familiar with dealing with life interests, Rights of residence, reversionary interests etc., particularly if the values are in the ballpark you're discussing.

This is illustrated by the fact that both
@Brendan Burgess and @Clamball have (understandably) oversimplified things and miscalculated the tax in a couple of different ways. As none of the four other siblings has yet become beneficially entitled in possession to anything there is no inheritance by any of them, yet, and hence no base cost for a disposal (or at least not in the way calculated).

The only inheritance taken in 2005 was the life interest of the fifth sibling, the value of which would depend on their age at the time - for illustrative purposes, if he were a 55-year old male, it would be 65.98% of the property value at that time. CAT dwelling house exemption may have applied, depending on circumstances and whether investment property was owned at the time.

What's being asked here is not a straightforward or common situation, particularly the proposed early termination of a life interest (which effectively constitutes the break-up of a trust) hence I suggest the need to find an experienced tax specialist, to avoid anyone paying more (or less) tax than they ought to.
 
Unless the poster says otherwise one has to assume that probate was granted and the house put in the name of the five siblings after their last parent died in 2005. That simplifies everything, apart from the sibling living in the house.

Brendan and I only had minor differences in our final figure and once the actual figures are correctly submitted to revenue they will do the calculation of the tax owed. They should have the value of the property back in 2005 already, they will have the sale price, the cost of selling will be clear and they input that to revenue and pay the tax. If I were one of the four siblings I would not spend a couple of grand on a tax specialist. Revenue have guidelines here
 
Thanks all, very helpful replies. The value I used for back in 2005 was an estimate but I have since confirmed there is an actual valuation from 2005 at the time of death/will/probate.
 
Clamball said:
Unless the poster says otherwise one has to assume that probate was granted and the house put in the name of the five siblings after their last parent died in 2005. That simplifies everything, apart from the sibling living in the house.
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It doesn't, really. The other four siblings didn't receive a one-fifth interest in a house in 2005; they received a one-fifth interest in a house which was encumbered with a life interest in favour of someone else. That's worth a lot less, obviously.

Then, in 2025, the sibling who has a life interest releases it. That's effectively a gift of the life interest to the other four siblings (CAT issues might arise. Let's not go there.)

The unencumbered interest which each of them is now selling was therefore acquired as the result of two transactions — the bequest of an encumbered interest in 2005 and the release of the encumbrance in 2025. The latter was a gift, not an inheritance; market value may be interposed. I think you may have to look at both transactions to identify the acquisition cost of the asset. Alternatively, you may need to apportion the disposal proceeds as between the interest bequeathed in 2005 and the interest gifted in 2025.

One way or another, I think this may not be as straightforward as you and Brendan suggest. I think a few shillings laid out on professional advice would be a wise investment.
 
torblednam said:
This is illustrated by the fact that both
@Brendan Burgess and @Clamball have (understandably) oversimplified things and miscalculated the tax in a couple of different ways.
Click to expand...

Which is why I alerted at the start...


Brendan Burgess said:
I am not a tax expert, but this is what I think will happen.
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and suggested...

Brendan Burgess said:
A tax specialist.

Most accountants in practice will know this stuff or will refer to a specialist if they don't.
Click to expand...
 
Clamball said:
Unless the poster says otherwise one has to assume that probate was granted and the house put in the name of the five siblings after their last parent died in 2005. That simplifies everything, apart from the sibling living in the house.

Brendan and I only had minor differences in our final figure and once the actual figures are correctly submitted to revenue they will do the calculation of the tax owed. They should have the value of the property back in 2005 already, they will have the sale price, the cost of selling will be clear and they input that to revenue and pay the tax. If I were one of the four siblings I would not spend a couple of grand on a tax specialist. Revenue have guidelines here
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@Clamball respectfully you are way out of your depth here (and out of most people's to be fair, but the difference is in your insistence that it's simple when it's not)...

Section 2 CATCA 2003 contains numerous definitions for the purposes of the Act. It defines “entitled in possession” as meaning "having a present right to the enjoyment of property as opposed to having a future such right, and without prejudice to the generality of the foregoing a person is also, for the purposes of this Act, deemed to be entitled in possession to an interest or share in a partnership, joint tenancy or estate of a deceased person, in which that person is a partner, joint tenant or beneficiary, as the case may be, but that person is not deemed to be entitled in possession to an interest in expectancy until an event happens whereby this interest ceases to be an interest in expectancy".

It defines “interest in expectancy” as including "an estate in remainder or reversion and every other future interest, whether vested or contingent, but does not include a reversion expectant on the determination of a lease".

Section 10 of the Act sets out the circumstances in which an inheritance will be deemed to arise:

"For the purposes of this Act a person is deemed to take an inheritance, where, under or in consequence of any disposition, a person becomes beneficially entitled in possession on a death to any benefit (whether or not the person becoming so entitled already has any interest in the property in which such person takes such benefit), otherwise than for full consideration in money or money’s worth paid by such person."

In 2005, the only person that took an inheritance (i.e. the only person that became beneficially entitled in possession to a benefit) was the life tenant. The other siblings all acquired an interest in expectancy, as defined. They will only become "entitled in possession" to an interest in the property on the cessation of the life interest of the life tenant (i.e. on that sibling's death or transfer / disposal / surrender of their life interest.

Given that this hasn't happened yet but is under contemplation, the only advice posters here should be giving - where property worth €1m being sold, and nobody understands the tax treatment of the interested parties - is that competent professional tax planning advice is needed.
 
So how does that all work? If, say, the life interest is approx 60%, do the other siblings receive 1/5th of the remaining 40%?

And if the person who has right to reside dies, does the formula then revert to simple fifths?

Wow, I never would have realised that a life interest went beyond the right to reside.
 
Seaniemed said:
Wow, I never would have realised that a life interest went beyond the right to reside.
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The first thing a good professional will ask is to see the will, and then ascertain whether it is a simple right of residence, or an exclusive one, that was created by the will.
The latter creates a life interest in Irish law, (which in turn means that the other 4 beneficiaries have only a remainder interest on the date of death.)
Either way, none of this is simple.
 
@Seaniemed
The devil is in the detail - it very much depends on the specific wording of the original will, it may be a non-exclusive right to reside, an exclusive right to reside, or a full life interest with the right to exploit the property as they see fit (e.g. let it and exclusive enjoyment of the rent arising).

Revenue's Tax and Duty CAT manual relating to Limited Interests is available for anyone who wants to know more:

 
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