BROTHERLY INHERITANCE TRANSFER
Q – My mother died last year and left me her house, now worth c. € 320,000 in her Will. The property though should really have gone to my older brother as he lived with her up to her death. Is there a tax issue if I transfer the house to him now ? Pat – Mullingar Co Westmeath.
A – Unfortunately yes there is Pat. The current inheritance threshold from parent to child is € 335,000 and if the property is inside this value, then you have no Capital Acquisition Tax to pay – currently 33% Capital Acquisition Tax (CAT) on the amount over this threshold. However, this property is now in your name ( you will also have to pay the 1% stamp duty as the Consanguinity Tax relief no longer applies plus legal costs ) but if you wish to pass this on to your brother, the second category threshold applies. This second category covers inheritances from
- grandparent
- grandchild or great-grandchild
- brother or sister
- or nephew or niece of the giver
The maximum amount for this grouping you can receive as one of the above tax free is € 32,500 and anything over this amount is again taxable at 33% (CAT). In tax terms, if your property was worth € 320,000, you would have no CAT liability from your mother. But if you transfer it over to your brother, the CAT tax he would have to pay would be a whopping € 94,875 ! Certainly worth having a chat with him and your financial adviser to look at other options that may be less taxing ! For instance if your brother lived with your mother three years prior to her death, and was going to continue to live there for a further 6 years plus after her passing has no other property, then had your mother left the home to your brother, the property would not even be considered as part of the estate and it would be completely CAT exempt. You could give him immediately his brotherly entitlement (€ 32,500) and perhaps the Gift exemption annual allowance of € 3,000…but would take you nearly 96 years to pay him back fully ! But I am impressed with the brotherly love !