Inheritance from Uncle in USA

[lemon1984]

Hi All,

My husband is from the US and has been living in Ireland since 2017. He is now a dual citizen and I would say his domicile is Ireland as he does not intend to ever return to the US, we are married with a child and house and he moved here following our marriage.
Recently his uncle passed away and left him and his brother and sister $20,000 each as he had no children himself. I'm trying to figure out the logistics of how he can even receive this money.
His uncle is a US citizen and lived all his life in the US so was domiciled there on his passing. His family have no ties with Ireland other than that my husband married me and moved here.
I'm unsure if this inheritance falls under our CAT rules for inheritance, or covered under the Ireland/US Tax Treaty. If it falls under normal CAT rules, is money from an Uncle Group B or C? Either way 20k dollars should be under both thresholds. If its normal CAT rules, does he need to receive this money in a certain way, i.e. transferred to a solicitor or accountant, and then declare it to revenue with certain documentation?

Or does it fall under the double tax treaty and subject to estate tax on his uncles side instead? His total estate would be way under the estate tax threshold of $13 odd million. If it falls under this, is there a certain way he needs to receive the money again, either to a solicitor or accountant, and does he need to declare it to someone specific with certain documentation, i.e. Revenue or IRS?

Note my husband is currently completely tax compliant in the US as we file his taxes yearly but he does not need to pay any.

 

[ClubMan]

In case there's anything useful in previous threads relating to this topic...

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[lemon1984]

Thanks, had a read and it seems that because his uncle was domiciled in the US, my husband in IE, and the 20k is coming from an insurance policy based in the US then it is covered under the double taxation agreement and subject to estate tax there. There will be no estate tax paid because the exemption in the US is so large ($13+ million) so basically no tax paid on the money.

What I cant seem to find out is if we need to file a CAT return still and claim a relief under the tax agreement. I had a look at the form and we cant fill it out because his uncle had no PPSN. We also cant claim a relief because no tax will be paid even in the US. Do we still have to inform Revenue somehow and how would we do so? I feel like we cant just deposit ~20k into his bank account without informing them as the bank will ask questions and probably inform Revenue? We want to make sure everything is done correctly. Does anyone have any insight on the reporting part.

 

[ClubMan]

What I cant seem to find out is if we need to file a CAT return still and claim a relief under the tax agreement.

An inheritance from an uncle to a nephew should be group B:

CAT groups

This page explains thresholds, rates and aggregation rules for calculating Capital Acquisitions Tax

www.revenue.ie

Normally a CAT return is only required if the inheritance (and any previous inheritances in the same group) exceed 80% of the exemption threshold - in this case 80% of €40K or €32K.

CAT group thresholds

This page explains the thresholds, rates and aggregation rules for calculating Capital Acquisitions Tax

www.revenue.ie

Capital Acquisitions Tax (CAT) thresholds, rates and aggregation rules

This page outlines CAT thresholds, rates, and aggregation rules

www.revenue.ie

You must file a Capital Acquisitions Tax (CAT) IT38 Return if the total taxable value of the benefits taken exceeds 80% of the relevant group threshold. You must include all other taxable gifts or inheritances taken from any source within the same group threshold on, or after, 5 December 1991.

I don't know if the cross jurisdictional issues here alter or inpinge on that requirement?

 

[AAAContributor]

My husband is from the US and has been living in Ireland since 2017.

Recently his uncle passed away and left him.....$20,000

His uncle is a US citizen and lived all his life in the US so was domiciled there on his passing.

I'm unsure if this inheritance falls under our CAT rules for inheritance, or covered under the Ireland/US Tax Treaty.

Your husband, who is tax resident in Ireland, will be subject to the provisions of Ireland's domestic inheritance tax legislation (Capital Acquisitions Tax Consolidation Act 2003 (CATCA 2003) on taxable inheritances, under first principles.

A non-domiciled person is not considered tax resident in Ireland for Capital Acquisitions Tax (CAT), unless the individual has been tax resident in Ireland for 5 consecutive years (Section 11(4) CATCA 2003). Your husband has been tax resident for more than 5 years, presumably.

However, your husband is receiving an inheritance from a US-domiciled disponer.

This requires referring to the US/IRE Double Tax Treaty (DTA) dealing with cross-border inheritances.

Under the exemption method in Article IV, Ireland cannot tax non-Irish 'property' (property in a wide-sense, i.e. the benefit) unless the disponer died whilst domiciled in Ireland, the disposition was governed by Irish law or the disponer died non-domiciled in the US.

The 'situs' of the property is determined by Article III.

the 20k is coming from an insurance policy based in the US

Article III states that the situs of a policy of insurance is based on the domicile of the disponer.

As the uncle is US-domiciled, the situs of such property is non-Irish.

As the US/IRE DTA supercedes Irish domestic CAT legislation, the DTA's provisions should prevail.

If it's absolutely the case in this instance that the disponer is US-domiciled and the situs of the inheritance is US, then the inheritance of US$20k is not a taxable inheritance in Ireland.

It follows that Irish CAT Group Thresholds, CAT filing thresholds, CAT rates are moot for this inheritance. The exemption under the US/IRE DTA does not have to be claimed (i.e. Revenue does not have to be notified as it is not a taxable inheritance in Ireland in the first instance. You are not claiming a tax credit under the DTA for instance which would require a filing. I would phone the Revenue CAT department to get clarity on this. If you speak with somebody experienced and you communicate the facts well, no filing (IT38) should be required. You may encounter a "computer-says-no" reply or a Revenue official with less experience (i.e. a response asking you to make a filing). Be prepared to challenge this and refer it up the chain if required).

This inheritance should also not be considered for aggregation if your husband was to subsequently receive a future gift or inheritance under the Group B threshold.

I feel like we cant just deposit ~20k into his bank account without informing them as the bank will ask questions and probably inform Revenue?

In the thread below (see post number 8), this individual who was in receipt of a non-Irish inheritance from a US-domiciled disponer had no trouble lodging US funds to an Irish bank account:

Inheriting money from USA

A relative has left me a sum of money in her will. She was born in USA. Lived all her life there and passed away there. Solicitor for the estate there said there is no inheritance tax in the state of New York only on life insurance or executors commissions. So do I then pay inheritance tax in...

www.askaboutmoney.com

 

[Flybytheseat]

Uncle Sam ??

 

[ClubMan]

Uncle Sam ??

He's not dead yet, but the prognosis may not be great...