Inheritance tax issues

[STEINER]

Hi,

We have had a shock family bereavement, there is a house willed from an unmarried uncle to his nephew and some cash at bank willed to family members. The nephew lives elsewhere and has very limited means, and certainly wouldn't have the resources to pay the inheritance tax of circa €40k. The nephew doesn't have a mortgage and rents at the moment.

Nephew will have to deal with this over the next few months anyway, family won't be going to solicitor for another week to discuss the process, but at least the tax deadline is 31st October 2014. Would it be fairly standard in cases like this that the house would be mortgaged to secure a loan of €40k in order to pay the tax? (assuming he able to make the repayments over the term of the loan).

Also, would be it ok for nephew to move into house sooner rather than waste money renting or wait months for the legal transfer etc? The house is unoccupied and we wouldn't want any break-ins, vandalism etc. Also, the other beneficiaries and a family member (executor) would be ok about the nephew moving in now, as it is willed to him. Anybody any thoughts? In any event we will get the lowdown from the solicitor in a week or so.

 

[Padraigb]

I am sorry about your loss.

The only person with authority to make decisions is the executor, albeit that decisions made before probate is granted must be regarded as provisional.

A wise executor will not make decisions that hamper making progress on dealing with the estate or which might in any way result in an avoidable cost or loss. Where any beneficiary is looking on the situation with greed or mistrust, the executor should be especially cautious. None of these caveats seem to apply here, and it looks to me to be reasonable for the executor to allow the nephew to occupy the house until distribution is made.

 

[STEINER]

Thanks Padraigb. That seems reasonable. I understand that there are 2 executors, one family member and the other the solicitor who drew up the will. It will largely be the solicitor doing the executor duties as the family member executor is aged and infirm now, although ok mentally, wouldn't be able to handle it. It will be another week until we contact the solicitor.

Regarding the issue of finding funds to pay the inheritance tax liability, its probably just a matter of getting a loan somehow, but if anyone has any advice about this aspect, by all means give me a shout.

 

[Bronte]

I too don't see any problems with the nephew moving in. Make sure to ask the solicitor how much his fee will be. What is the value of the house? Does the nephew have an income and what age is he.

 

[mathepac]

My Condolences on your loss.

... The only person with authority to make decisions is the executor, albeit that decisions made before probate is granted must be regarded as provisional. ...

+1 Personally I would postpone any decisions, or hints at decisions, provisional or otherwise, until after consulting with the solicitor and until after the grant of probate.

... A wise executor will not make decisions that hamper making progress on dealing with the estate or which might in any way result in an avoidable cost or loss. ....

+1 I doubt if the solicitor / executor will agree to allowing someone to occupy the house until all matters relating to the taxation of the estate are settled. This is simply following the required steps in the correct sequence, not skipping ahead or denying anyone their right.

Taxes are due to the Revenue pre-distribution AFAIK. In the event they are not paid, the executors become liable for the unpaid taxes.

If the nephew moves into the house and subsequently cannot pay the taxes or raise a loan, what happens? Will the house have to be sold to pay the tax and if so how do you sell the house with an existing occupant?

Remember it's the executors that are on the line here so to speak, not the family members, which is why an executorship is not a democracy.

I'm not trying to rain on anyone's parade, but please proceed with extreme caution in the circumstances. IANAL.

 

[STEINER]

Thanks to all who replied.

Nephew is aged fifties and unwaged. Nephew is now not interested in the property after all and will disclaim. Its been over a decade since I studied any tax course, so I present the following scenario for comments.

Deceased uncle Gabriel has willed property to nephew Matthew and some cash to a brother Michael and nephews Matthew, Mark, Luke & John. Residue goes to just the 5 named beneficiaries.

Nephew Matthew will disclaim the ~ €120,000 property inheritance.

€120,000 property is now in the residue between the 5 beneficiaries.

1/5 share of the property to each ie €24,000 value which is below the Group B €30,150 threshold for each.

Ignoring any cash inherited and the 5 owners, does that scenario zero the inheritance tax on the €120,000 property?

Nobody has used up any of their Group B threshold.

 

[STEINER]

I entered the data into this calculator I found on the zurichlife.ie website.

It does calculate a zero inheritance tax liability for us, which is good news.

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