Q. I own an apartment in which my daughter has lived for the last 5 years and it has been my intention to leave it to her in my will. Will it mean that it will now be subject to tax? Michelle – Phibsboro D7

A. Until now Michelle, under a provision of inheritance tax rules, it was possible for a parent to pass on houses or apartments to their children free of tax under what is known as the Dwelling House Exemption. This exemption was originally intended as protection for a child living with and caring for a parent and who may have passed up on the chance to purchase their own home. The nature of the exemption however was so open that the property did not even have to be a family home. It could be a second property or even a holiday home. All that was necessary was that the son or daughter inheriting the property owned by the parent had lived in it for at least three years, owned no other property at the time and continued to live there for six years after inheriting. In such a case there was no inheritance tax liability and the beneficiaries were still able to avail of other tax-free thresholds. It has long been felt that this looseness in the legislation allowed wealthy individuals to pass on this wealth in a tax free manner that was outside the spirit of the exemption. In the 2016 Finance Bill the Minister amended the rules so that the exemption applied only to those inheriting the home where they were living with an aged parent to care for them or to young children whose parents died. So if the apartment your son is inheriting exceeds a value of € 335,000, there will be a 33% Capital Acquisition Tax payable on the surplus.

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