How do I cut tax on cash left by US sister?
Q My sister, who is a US citizen and has lived all her adult life in the US, is reviewing her will. She has told me, her brother, that she intends willing an amount of money to me. Is there a tax-efficient way of doing this?
It is also her intention to have her remains buried in Ireland, and I will be responsible for making all the funeral arrangements for her internment. To this end, she has asked me to set up a bank account into which she can transfer money on a monthly basis to cover the cost of her funeral. What is the best way of doing this without again having tax implications for either of us?
Cootehill, Co Cavan
A Gift or inheritance from a brother or sister is tax-exempt up to €32,500 in Ireland - providing no other gifts or inheritances have been received. In addition, an annual gift of €3,000 can be received tax-free under the small gift exemption. If your sister is thinking of leaving you more than €32,500, the annual small gift exemption could be a useful way of saving some of the tax which would be payable on any future inheritance.
It might be possible for your sister to set up an Irish bank account giving you signing authority. If this is not possible, then you could get her to transfer €3,000 a year to your account as a gift which will be tax-free here under the small gift exemption. You would then agree to pay for all the funeral expenses from that money. She could make this annual gift each year until she gives to you what is needed to cover the funeral costs.
A complication here is that an Irish citizen receiving inheritances from an American citizen is subject to a complicated double taxation agreement between Ireland and the US. Tax advice should be sought before any monies transfer to clarify your particular situation.
Helping nieces and nephews
Q I am a single person without children. I have two sisters - one sister lives in Britain with two children, and the other lives in Ireland with three children. What is the most tax-efficient way to pass on my few assets to them when I pass away? I have a house and a bit of land, which would realise perhaps €300,000 if sold. My sisters don't need the money, and the kids are too young yet to know what they need or where they might end up. I was thinking of instructing my sisters to dispose of my assets and set up a trust fund for the five kids with the proceeds - with my sisters to manage the fund and control access to it. I would specify in a letter of wishes that I would like the funds to be used to give the children a start in life, leaving the details to be of their choosing, with guidance from their parents. Is this possible? Are there more tax-efficient ways of doing the same job?
Ballinastoe, Co Wicklow
Yes, of course it is something that can be done, but my initial reaction is that it is a very complicated way of distributing a relatively simple estate when you go. I am not sure if your sisters will thank you for the complication. In any event, who is to say that you will not outlive the two of them? And who will then administer your estate?
Perhaps there is a simpler solution. Why not update your will and leave instructions for your house and land to be sold on your death. You could then leave it to be divided equally between your two sisters and their five children. Each sister and niece or nephew can receive €32,500 free of tax, which will mean that €227,500 will transfer tax-free. If your sisters have partners, then each of them can receive an additional amount of €16,250 tax-free. Yes, they might have to pay some tax on the excess they receive, but it will be simple and uncomplicated.
Also, as your funeral costs and other expenses from the sale will come off the value, there might not be too much tax payable. If you decide to leave all to your nieces and nephews, and exclude your sisters, then there will be a little more tax payable.
Should your nieces or nephews be under 21 at the date of your death, you can stipulate in your will that the money is to be invested for them by their parents until they reach a certain age.
Do I face bill for house gift?
Q I AM planning to buy a house in Galway, and my parents have kindly offered to provide the entire purchase price. The purchase price is in the region of €270,000. Is there a way to transfer this money and be tax-compliant - but not for my parents or I to be taxed exorbitantly at the time or further down the line? I have a disability: I am registered as blind and have reduced mobility. I am in my mid-20s and I am in temporary full-time employment for the next 10 months.
Parents can make a gift to each of their children of up to €310,000 tax-free. So this gift of €270,000, providing no previous gifts have already been made, will be tax-free and the growth in value will not cause any future taxation issues, as the house will be in your ownership and so will any future growth in value. This gift from your parents should be notified to the capital taxes unit of the Revenue Commissioners (by you or your accountant) so that the value of the gift is agreed and recorded.
If you receive future gifts or inheritances from your parents in excess of the difference between the threshold amount (currently €310,000), and the gift you are now receiving of €270,000, you would be liable to tax on that amount at 33pc (current tax rate).
It is worth bearing in mind, though, that in every calendar year, both of your parents can also give you, free of tax, an amount of €3,000. So in total, an extra €6,000 per annum can be given to you free of tax.
It's worth knowing that there is a housing adaptation grant for people with a disability to help you if changes and adaptations need to be made to your new home. You should contact the Citizens Information Board (www.citizensinformationboard.ie) for more information about this.
Tax due on old Eircom shares
Q My wife and I bought Eircom shares in 1999. None of the shares were sold, except for whatever transaction took place when Vodafone's US interests were sold to Verizon. Recently, I realised that I had not returned the annual dividends from those shares in my annual PAYE tax return. From 2004 to date, the combined dividends amount to €1,400. Should my dividends have been included in my tax returns and, if yes, will I be subject to PAYE/PRSI on the dividends?
Naas, Co Kildare
Q Irish kresidents are liable to income tax at a marginal rate - plus PRSI and USC on all British dividends received. Recent rules on making a voluntary disclosure regarding offshore assets under the Finance Act 2016 apply here. The amount of additional tax which may apply is potentially around €700 before interest and penalties - but this is dependent on all other factors affecting your tax position.
You should talk to a tax accountant to correct the situation - or contact Revenue directly. There is also a Capital Gains Tax (CGT) implication of the Verizon split, but it will not result in a CGT liability from the Eircom transaction, as a loss will arise.
Sunday Indo Business