Monday 23 October 2017

My sister is leaving me money in her will - what's the most tax efficient way to do this?

Email your questions to lmcbride@independent.ie or write to ‘Your Questions, Sunday Independent Business, 27-32 Talbot Street, Dublin 1’. (Stock image)
Email your questions to lmcbride@independent.ie or write to ‘Your Questions, Sunday Independent Business, 27-32 Talbot Street, Dublin 1’. (Stock image)

Ted Dwyer, Founding director of City Life (www.citylife.ie)

Question: 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?

Anthony,

Cootehill, Co Cavan

Answer: 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.

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