For the purpose of gift and inheritance tax, the relationship between the person who provided the gift or inheritance, i.e. the disponer, and the person who received the gift or inheritance, i.e. the beneficiary, determines the maximum tax-free threshold. The group thresholds are indexed by reference to the consumer price index. The current year thresholds are as follows:
|
Group
|
Relationship to Disponer
|
Group Threshold 2004
|
|
|
€
|
|
A
|
Son/Daughter
|
456,438
|
|
B
|
Parent*/Brother/Sister /Niece/Nephew/Grandchild
|
45,644
|
|
C
|
Relationships other than Group A or B
|
22,822
|
*In certain circumstances, a parent taking an inheritance from a child can qualify for group A threshold.
Estates and exemption limits are not tested in totality rather each beneficiary is entitled to the thresholds outlined and inheritance or gift tax is imposed on each individuals benefit from an estate.
In regard to the example outlined by the Deputy, a child inheriting under €456,438 would be exempt from inheritance tax provided there were no prior benefits received from this individual falling into the same group threshold. All benefits taken within the same threshold since 5 December 1991 are aggregated in calculating tax due.
Where a benefit inherited by a child includes property valued over €456,438 there would normally be a tax liability attached to the benefit exceeding that sum, calculated at the rate of 20%. However, in circumstances where a child is resident in that property, section 86 of the Capital Acquisitions Consolidation Act 2003 may apply. This section provides that gifts or inheritances of a dwelling-house taken on or after 1 December 1999 will be exempt from capital acquisitions tax provided the following conditions are complied with: the recipient has occupied the dwelling house continuously as his or her only or main residence for a period of three years prior to the date of the gift or inheritance; at the date of the gift or inheritance of the dwelling-house the beneficiary must not own any other dwelling-house or any interest in any other dwelling house; and the beneficiary must occupy the dwelling house as his or her only or main residence for a period of six years after the date of the gift or inheritance. This will not apply where a beneficiary is 55 years or over on the date of the gift or inheritance.
In regard to subsequent or additional inheritances taken by an individual benefiting from the dwelling house exemption above, the full tax-free thresholds apply before they become liable to inheritance tax.
With regard to sharing an estate equally and allowing siblings to make private arrangements for settling the house transfer, I would refer to the threshold for group B above and point out that gifts over this amount would have a liability to gift tax.
