Inheritance confusion as both mother and brother have died

My sister lived and worked all her life in Ireland and died June 4th, 2019. Her son died shortly afterwards on July 2nd. Her daughter survives in good health, thankfully.

The big asset issue is the inheritance of my sister’s house which she bought immediately after her divorce in 2009 or 2010 (I think).

The UK, where I live, is a different place on intricate legal matters I’m sure but a death less than 28 days later here would, I believe, mean that the son would be deemed to have died at the same time and therefore his estate would not inherit anything.

My sister’s ex-husband does not wish to accept the inheritance that would have gone to his son had he lived, but as next of kin he’s being told that he can’t simply reject his entitlement. Hefty tax may be involved. He has remarried and has serious health issues himself.

Inheritance confusion as both mother and brother have died

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There was no up to date written will. I believe that my sister had written a will before her divorce but understand that it is irrelevant. I have not seen it.

Understandable emotional issues, and Covid lockdowns, are preventing my sister’s daughter and her dad from pushing hard to get this resolved. Can you advise me about what Irish law indicates?

Is there a clear cut equivalent to the UK 28 days? If not, what do you advise? Are there unavoidable tax penalties involved in making sure that my sister’s daughter gains full ownership of her house?

Mr E.M., London

There is a lot of crossover in law between Ireland and Britain but they have diverged in places over time. I am familiar with the 28-day rule under British succession protocols. However, it does not appear in Ireland’s Succession Act which governs such matters and dates back to 1965.

So what does that mean for your sister’s estate?

Critically, it means that, at the date of your sister’s death, both her children – the son and the daughter – were alive. As such, both stood to inherit. There is no requirement for them to survive her by 28 days in order to inherit.

There is a separate issue around the issue of your sister’s divorce from her husband. And then there’s the thorny issue of tax.

Divorce means lots of changes for people in their relationships with one another. In Ireland, that includes much to do with inheritance. For instance, a divorced spouse no longer has any entitlement to what is called the “legal right share”. This provides that a person is entitled to at least one half of their spouse’s estate where there are no children, and one-third where there are children.

But significantly in your case, there is nothing in Irish law that automatically revokes a will on divorce. This might be seen as unusual, especially as the act of marriage does revoke all previous wills except where they have been drawn up in the specific context of an upcoming marriage.

I imagine the thinking was that the issue of wills would be specifically dealt with in any divorce settlement approved by the courts – and, for most people, that is very likely the case. However, if not expressly revoked under the settlement, then a will remains in legal force.

This is key in your sister’s circumstances. You say that there was a will but that it predated the divorce. That being so, you will need to check the divorce documentation to confirm that it was revoked as part of the divorce.

If it was, and your sister made no subsequent will, she will be considered to have died intestate. If, however, the old will remains in force, then we need to consider the issue of renouncing an inheritance.

The issue of renouncing or “disclaiming” a benefit may also apply if your sister’s son died with no will himself – or a will that provided for his father.

Intestacy The rules on who gets what under intestacy are laid out clearly in the Succession Act 1965.

Where there’s a spouse and no children, the spouse gets everything. However, divorce does revoke all succession rights relating to an ex-spouse, so in the absence of a will, they get nothing.

In the absence of a spouse, children share an estate equally. If there is no spouse and no children, next in line to inherit are parents. If they are no longer living, siblings are next in line to benefit and, later, nephews and nieces.

In your sister’s case, the two children benefit in equal amount regardless of the fact that her son died so shortly after her. So they share the home and anything else. We shall return later to the death of the son.

In tax terms, the daughter can benefit to the tune of €320,000 given her mother died before October 2019 when the threshold rose to €335,000. On anything above that, tax is levied at 33 per cent.

If there is a valid will leaving something to the now-former husband, it is open to him to disclaim or revoke this share or bequest.

According to the Revenue Commissioners, he needs to do this before any assets are transferred to him – either as bequests or as part of the residue of the will if he is to avoid inheritance tax/capital acquisitions tax.

Assuming he does disclaim his interest in the estate, it returns to the residue (that portion of an estate left after specific bequests have been satisfied) to be allocated according to the instructions in the will.

I’m guessing the bigger issue for the ex-husband is the death of the son. If the son has died without making a will – quite possible given his likely age – then his estate will get treated under the rules of intestacy. And if he has no spouse/partner or children, then that means his estate passes to his remaining parent.

That would leave the ex-husband with a 50 per cent share of the house in question.

But, again, even under intestacy, there is nothing to prevent the father disclaiming his right to inherit. That seems to be his preference and there is no impediment to him doing so, and no tax bill for him as long as he does it before taking possession of the estate.

If he does disclaim under intestacy, the estate will pass to the next in line – his siblings, in this case his only sister. And that would mean she has control of her mum’s former house which is what I understand everyone is trying to achieve in this case.

Taxation However, there is a twist in that, as she is inheriting the outstanding half interest in the home from her brother, she will likely have an inheritance tax bill as she can only benefit to the sum of €32,500 from a sibling before the 33 per cent tax kicks in.

It the father has already accepted ownership of the property, it does also get more complicated as he would have to gift it to the daughter. He can do this but she might still have a capital acquisition tax bill as the gift – alongside what she has inherited from her mother – could bring her above the current €335,000 limit.

In this scenario, the father might also have his own capital acquisitions tax issues on what he received from the son depending on what he had previously inherited from his own parents.

So where does that leave us? First of all, it confirms the importance of people making wills so that things are allocated as they wish rather than as the law dictates.

More particularly, as far as I can see, there is no reason your sister’s daughter cannot inherit her mum’s home with her father disclaiming any interest without tax penalty to him. Next of kin status should not affect this. However, it will likely carry a cost and you need to work out the sums.

It may be that it makes sense financially for the daughter that her father accept the son’s share in the property and then gift it on to her. That depends on the value of the property and previous inheritances received by the father. All a little complicated I know but ...