Inheritance

[rockyracoon]

Mr RR's aunt died a couple of years ago (in Ireland) without leaving a will. He is now entitled to approx €23000 and I believe a cheque is on it's way. Now, the aunt had a son that should, morally, receive the money, but for reasons I won't share on here, he is not entitled. Mr RR intends to send him the cash as soon as it hits our account.

Are there any tax complications for us? I know that if Mr RR dies within 7 years there will be tax to pay, but I'm presuming that will be for the cousin to settle, not Mr RR's estate, is that correct?

[davebro]

//Any Inheritance Tax due on gifts is usually paid by the estate//

https://www.gov.uk/inheritance-tax/gifts#:~:text=Inheritance%20Tax%20may%20have%20to,the%20value%20of%20the%20gift

[barry1010]

If a gift of money or parts of an estate is given to a relative or family member and the gift-giver dies within seven years, the individual in receipt of the gift may be taxed. This is known as the inheritance tax gifts “7-year rule”.
https://www.dbtandpartners.co.uk/legal-articles/inheritance-tax-gifts/

[barry1010]

RR, does your husband and cousin both live in UK? It could be different it both live in RoI or one lives in RoI and the other in UK

[naomi24]

It might be worth having a chat with someone who specialises in EU/Irish law on inheritance. Is it the same as ours?

[barry1010]

RR, I strongly advice MrRR to look at a Deed of Variation - this allows any inheritance to be re-directed to anyone he likes and avoids inheritance tax altogether

[rockyracoon]

Thank you, all. Both parties are in the UK.

I just don't want us saddled with a tax bill for doing the right thing.

[bhg481]

I suppose the simple way to to hold back the potential tax (40%?) from the initial payment, put it into a separate account. The potential tax diminishes over the years, so he could send him some more money each year or the whole lot after 7 years.

[bhg481]

barry's advice on a Deed of Variation sounds good.

[barry1010]

https://smithpartnership.co.uk/individuals/deed-of-variation-will#:~:text=A%20Deed%20of%20Variation%20is%20an%20agreement%20of%20changes%20to,their%20share%20of%20the%20estate.

[barry1010]

bhg, it would be 7 years after the death of MrRR

[naomi24]

Barry, there was no will.

[rockyracoon]

'RR, I strongly advice MrRR to look at a Deed of Variation - this allows any inheritance to be re-directed to anyone he likes and avoids inheritance tax altogether'

Apparently, not possible in Ireland. It was the first thing we enquired about. The money will go straight back to the estate and get divided between the other inheritors. This we absolutely do not want as the cousin likely won't see much of it.

[rockyracoon]

Bhg, that sounds like a sensible plan.

[barry1010]

As both Mr RR and cousin are in the UK then any inheritance tax due on the gift should Mr RR die within 7 years will be paid by the cousin so don't worry about that.

A deed of variation can still be used where the inheritance followed the rules of intestacy so that is the route I would choose.

[davebro]

you can give £3000 pa without tax implications if there are no other gifts.

[davebro]

// will be paid by the cousin so don't worry about that.//

that's not what the gov website says - I think the liability would fall to the estate, whoever actually pays it

[bhg481]

barry - it's the date of the gift from Mr RR that starts the seven years, not the date of Mr RR's death. Once seven years have passed since the date of the gift there will be no tax to be paid from MrRR's estate.

[bhg481]

Another option, of course, is for MrRR to give half the money to you and you also send the son some money. MrRR's gift to you doesn't count for IHT purposes and your gifts to the son are completely separate from your husband's.

[Buenchico]

I got lost with this question early on!

As the death occurred in Ireland, I can't see much point in people posting links to the intestacy rules in the UK. Those for Ireland can be found here:
https://www.gov.ie/en/publication/bbc5d-succession-rights-in-ireland/
(Click on, or scroll down to, 'Cases where there is no will')

I can see nothing in that link about any circumstances under which the aunt's son could be barred from inheriting his mother's estate (or part of it, if he has siblings).

Further, if the estate does actually legally pass to the son (or to any other child/ren of the deceased, or to a grandchild whose parent is deceased) then a tax-free threshold of €335,00 applies.

Otherwise (as the estate, or a part of it) is going to a nephew of the deceased, a tax-free threshold of €32,500 applies.

So, depending upon whether there are others who're inheriting or not (i.e. upon whether the entire estate is valued at greater than €32,500 or not), there might not be any inheritance tax to pay.

With regard to Mr RR's estate, there won't be any inheritance tax to pay if he pre-deceases you and leaves everything (above the automatic £325,000 threshold) to you or to a charity. If you pre-decease him, leaving everything to him, his estate will get your allowance too, taking the threshold to £650,000. So, depending upon the value of his estate, there might not be any inheritance tax to pay at all.

Note though that the value of any gifts given during the seven years prior to Mr RR's estate, or a part thereof, will be included when assessing the value of his estate. However the first £3000 given away in any one year is discounted from the calculation. So Mr RR could give £3000 of his inheritance (if he actually does inherit anyway, which has still got me baffled!) to his aunt's son each year for about 7 years, until the €23,000 has been disposed of. He could also amend his will to ensure that, if he was to die before that period was up, his aunt's son would still get the money.

[barry1010]

I was quoting UK law because if Mr RR accepts the inheritance it forms part of his estate. He is in the UK so any gifts he gives will be subject to UK laws