I am informed by Revenue that for inheritance tax purposes, the relationship between the person who provides the inheritance (i.e. the disponer) and the person who receives the inheritance (i.e. the beneficiary) determines the maximum amount known as the “Group threshold” below which inheritance tax does not arise.
There are three separate Group thresholds based on the relationship of the beneficiary to the disponer. The Group A threshold (currently €310,000) applies, inter alia, where the beneficiary is a child (including adopted child, step-child and certain foster children) or minor child of a deceased child of the disponer. The Group B threshold (currently €32,500) applies where the beneficiary is a brother, sister, a nephew, a niece or lineal ancestor or lineal descendant of the disponer. The Group C threshold (currently €16,250) applies in all other cases.
Any prior gift or inheritance received by a beneficiary since 5 December 1991 from within the same Group threshold is aggregated for the purposes of determining whether any tax is payable on a benefit. Where a person receives gifts or inheritances which are in excess of their relevant tax free threshold, CAT at a rate of 33% applies on the excess over the tax free threshold.
Section 86 of the Capital Acquisitions Tax Consolidation Act (CATCA) 2003 provides for a dwelling house exemption which allows for property to be inherited tax free where the inheritor is already living in the home subject to certain conditions. Firstly the inherited dwelling house must have been the deceased person’s principal private residence at the date of his or her death. This requirement is relaxed in situations where the deceased person had to leave the house before the date of death because of ill health; for example, to live in in a nursing home. In addition the beneficiary must not have a beneficial interest in another residential property. Finally the beneficiary must have lived in the house for 3 years prior to the date of the inheritance and must continue to live in the dwelling house for 6 years after the date of the inheritance.
If a beneficiary qualifies as a ‘dependent relative’ then there is no requirement that the dwelling house be the principal private residence of the disponer or that the beneficiary remain in the dwelling house for 6 years after the date of the inheritance. For this purpose, a dependent relative is a direct relative of the disponer, or of the disponer’s spouse or civil partner, who is permanently and totally incapacitated because of physical or mental infirmity from maintaining himself or herself or who is over the age of 65.
As the dwelling house exemption applies equally to siblings as to any other persons residing together, I therefore have no plans to amend this legislation.