Key Post Wife inheriting shares with capital gains

Brendan Burgess

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If a man dies with a share portfolio in his own name, the capital gains disappear. So his estate doesn't have to pay CGT.

I assume it doesn't matter if the wife inherits the shares? I assume she does not have a base cost of the original cost of the shares?

If so, then it's good tax planning for a husband and wife to own their assets separately and never jointly. I am surprised that I have not heard this planning point before.

Which brings me to another issue - is there a good tax planning guide for married couples?

1) Both should have income to use up the 20% tax band from joint assessment
2) Both should consider giving their children €3,000 a year to use the small gift exemption from CAT
 
If Mr and Mrs Jones buy €100k worth of shares jointly which are worth €200k when Mr Jones dies, what is the acquisition cost for Mrs Jones when she goes to sell the share? I assume €100k.

If Mr Jones buys €50k worth of shares and dies when they are worth €100k, then Mrs Jones gets them at an acquisition cost of €100k.

Brendan
 
If a man dies with a share portfolio in his own name, the capital gains disappear. So his estate doesn't have to pay CGT.

I assume it doesn't matter if the wife inherits the shares? I assume she does not have a base cost of the original cost of the shares?

If so, then it's good tax planning for a husband and wife to own their assets separately and never jointly. I am surprised that I have not heard this planning point before.

Which brings me to another issue - is there a good tax planning guide for married couples?

1) Both should have income to use up the 20% tax band from joint assessment
2) Both should consider giving their children €3,000 a year to use the small gift exemption from CAT
Great point, never occurred to me.
 
It’s good tax planning to have assets carrying big latent gains in the sole name of the deceased spouse. The capital gain just washes away.

The problem is knowing who’ll die first, but that’s often signposted.

There can also be opportunities when one spouse has high or no income.

The administration point around Wills etc is always an issue; one should always leave enough cash or value accessible for the surviving spouse.

Protecting entitlement to benefits may also be relevant.
 
It’s good tax planning to have assets carrying big latent gains in the sole name of the deceased spouse. The capital gain just washes away.

Thanks Gordon

Case 1
So Mr and Mrs are 50 and are healthy and have €100k to invest.

At this stage, it does not matter, for tax planning purposes, whether the shares are owned jointly or individually - assuming both have other income which uses up the 20% tax band.

So they buy them jointly for administrative reasons.
The shares increase in value to €300k and Mrs dies suddenly.
Now the cost of Mr's portfolio for CGT purposes is as follows
His wife's share at €150k - the Capital Gains have washed away.
His share €50k 1/2 the original cost.

Do I understand that correctly?
 
Case 2
As above, Mr and Mrs own a portfolio worth €300k which cost them €100k - so unrealised gains of €200k.
Mr is diagnosed with a terminal illness and given 3 months to live.

All the shares should be immediately transferred into his sole name.
He dies.
The capital gains disappear.
His wife's acquisition cost for CGT is €300k

Brendan
 
Thanks Gordon

Case 1
So Mr and Mrs are 50 and are healthy and have €100k to invest.

At this stage, it does not matter, for tax planning purposes, whether the shares are owned jointly or individually - assuming both have other income which uses up the 20% tax band.

So they buy them jointly for administrative reasons.
The shares increase in value to €300k and Mrs dies suddenly.
Now the cost of Mr's portfolio for CGT purposes is as follows
His wife's share at €150k - the Capital Gains have washed away.
His share €50k 1/2 the original cost.

Do I understand that correctly?
Yes.
 
Case 2
As above, Mr and Mrs own a portfolio worth €300k which cost them €100k - so unrealised gains of €200k.
Mr is diagnosed with a terminal illness and given 3 months to live.

All the shares should be immediately transferred into his sole name.
He dies.
The capital gains disappear.
His wife's acquisition cost for CGT is €300k

Brendan
Yes.
 
Thanks Gordon

I feel a Key Post coming on...

"Investment and inheritance planning for married couples"

I am surprised that I can't find anything online about it.

This Irish Life guide looks interesting.

https://my.bline.ie/media/367/download
 
Case 2
As above, Mr and Mrs own a portfolio worth €300k which cost them €100k - so unrealised gains of €200k.
Mr is diagnosed with a terminal illness and given 3 months to live.

All the shares should be immediately transferred into his sole name.

He dies.
The capital gains disappear.
His wife's acquisition cost for CGT is €300k

Brendan
Sounds like artificial tax avoidance.
 
The rebasing of assets on death works both ways

1990 - Husband buys Property for 100,000
2019 - Husband dies and spouse inherits property at 2019 value of 1,000,000

1999 - Husband buys Property for 172,000
2019 - Husband dies and spouse inherits property at 2019 value of 105,000
 
No it isn’t. You might as well say that moving assets around so a spouse with no income can use his/her Standard Rate Cut Off Point is artificial tax avoidance.
False conflation.

Tbe scenario mentioned above was that the recipient spouse had three months to live.
 
False conflation.

Tbe scenario mentioned above was that the recipient spouse had three months to live.
General anti avoidance has no relevance whatsoever to a scenario where assets are transferred to a spouse who has three months to live.

It’s not ‘false conflation’…they’re both scenarios in which it’s ridiculous to suggest that Revenue would invoke general anti avoidance.
 
General anti avoidance has no relevance whatsoever to a scenario where assets are transferred to a spouse who has three months to live.

It’s not ‘false conflation’…they’re both scenarios in which it’s ridiculous to suggest that Revenue would invoke general anti avoidance.
What is your definition of anti-avoidance and how does it differ from mine, viz.?
A transaction that makes no sense in the absence of a tax advantage is the essence of artificial tax avoidance.
 
Hi Tommy

It's not really your definition or Gordon's definition.

It is what sort of transactions which spur Revenue to invoke the legislation.

I very much doubt that they would pursue a widow because she transferred €300k worth of assets to her dying husband and saved €100k CGT.

They might do it if it were a transaction of €100m.

Brendan
 
Hi Tommy

It's not really your definition or Gordon's definition.

It is what sort of transactions which spur Revenue to invoke the legislation.

I very much doubt that they would pursue a widow because she transferred €300k worth of assets to her dying husband and saved €100k CGT.

They might do it if it were a transaction of €100m.

Brendan
Hi Brendan,

In a real-life situation, would you stake your livelihood on a recommendation that you knew breached the textbook definition of a tax-avoidance transaction, in the hope that Revenue probably wouldn't invoke anti-avoidance legislation if the transaction came to their attention?
 
Hi Brendan,

In a real-life situation, would you stake your livelihood on a recommendation that you knew breached the textbook definition of a tax-avoidance transaction, in the hope that Revenue probably wouldn't invoke anti-avoidance legislation if the transaction came to their attention?

As an accountant, you might not feel comfortable making the recommendation to your clients.

But as a tax payer I wouldn't think twice about doing this transaction.
 
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