Inheritance...tax and other issues

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misstealeaf

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My dad passed recently and left his property to my mam and all other interests in his estate to me. These other interests comprise of
1 savings
2 death in service benefit from his job
3 critical illness insurance policy
4 life assurance policy

The solicitor told my mam that the life assurance policy does not form part of the estate. Is this correct? Does this men that it does not take up part of my threshold (225k) for CAT purposes?

I would like to share part of my inheritance with my mam e.g. Give her 50% of the sum of 1-4 above. I obv have 2 options in this regard so I am wondering what is possible:
1 take the full inheritance myself then gift part of it to my mam.
2 alter the will/disclaim part of my share in the estate in her favour.

No 2 is my preferred option from a tax perspective as (I) the sum of 1-4 above will be close to my total group a inheritance tax threshold of 225k (ii) technically if I gift to my mam she will be liable for CAT on the gift above the group 2 threshold (iii) if she pre deceases me her entire estate will be willed to me so I could inadvertantly end up paying tax on monies she leaves as I used up part of my 225k threshold taking my dads inheritance to pass it to her. 2 seems the most advantageous to me....I hope that makes sense.

My question is really if 2can be done, how I'd go about doing, when it needs to be done before/after probate. Really appreciate any feedback on this.
 
He may have left everything else to you, but that doesn't change the fact your mother is entitled to her legal right share.

In relation to your tax planning, has your solicitor not explained it to you?
 
My mother doesn't want anything additional under the will- it is me who is pushing to give her a share of the remainder of the estate. My understanding is that her legal entitlement (as his spouse) is to a share of 1/3 of the estate- am i wrong in saying this? Based on the property she is receiving this is well in excess of 1/3 of the estate anyway.

I understand the tax implications alright both from an inheritance tax and a gift tax perspecitve hence why my question really centres on whether or not i can disclaim part of the will in her favour- she would then take what is hers and i would take mine and as a result i would use a lower amount of the Group A tax threshold. My mam would not have a CAT liability on any of her inheritance given that she is taking it from her spouse.
 
Firstly, I'm sorry for your loss.

Assurance policies with a named beneficiary do not form part of the estate but are still counted for your CAT threshold.

Disclaiming part of your inheritance in favour of your mother will still be treated as a gift from you to her and so doesn't work for tax purposes. A disclaimer only works where the person disclaims their entire inheritance.
 
Thanks for the response Nige. So would i be right in saying that the best way around this for me would be to disclaim my full entitlement in the estate, this would then pass to my Mam as there are no other beneficiaries of the estate. She could take the inheritance tax free as it is comign from her spouse. She could then chose to gift me part of this inheritance, an amount we both mutually decide on. That way only part of my Group A threshold would be used and this would be via a gift from my mam as oppossed to an inheritance from my dad?

Thanks.
 
misstealeaf said:
Thanks for the response Nige. So would i be right in saying that the best way around this for me would be to disclaim my full entitlement in the estate, this would then pass to my Mam as there are no other beneficiaries of the estate. She could take the inheritance tax free as it is comign from her spouse. She could then chose to gift me part of this inheritance, an amount we both mutually decide on. That way only part of my Group A threshold would be used and B]this would be via a gift from my mam as oppossed to an inheritance from my dad?[/B]

Thanks.
Click to expand...

There is no additional tax benefit in receiving money as a gift rather than an inheritance, except that the first €3,000 in gifts received each year is CAT-free.
 
misstealeaf - that's right. If you disclaim in full and your mother then makes a gift to you, you are effectively getting the sum you want now and your mother doesn't have any gift tax liability as she is inheriting from her spouse rather than getting a gift from her daughter.
 
Is this not exactly the type of case that a Deed of Variation (or Deed of Family Arrangement) exists to facilitate?

This doesn't involve anyone disclaiming anything and having to depend on anyone else honouring an understanding, but just divides the assets as the parties to the deed agree...
 
Sorry, I misread which direction value/gift would be moving under the Deed, it would only be tax efficient if the additional value was moving to the child...
 
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