Solicitor's advice on inheritance is simply wrong
Confused over whether daughter will pay tax if we leave her our home
The Category A tax threshold on inheritances and gifts has absolutely no bearing on dwelling house relief. Photograph: iStock
We recently approached a solicitor with a view to bequeathing our house to a daughter who has lived here since she was born in the 1960s. She has never lived anywhere else and has never bought property.
We understood that she could inherit our/her home at no tax cost, but our solicitor believes she will incur such once the value exceeds that allowed to a child – €310,000 or so.
Is the solicitor correct that she will have a tax liability in these circumstances?
Mr WD, Dublin
I think you need to find a new solicitor. I’m not being flippant here. If your legal adviser is not aware of the provisions of dwelling house relief, then he or she really should not be advising anyone on estate planning, wills and inheritance.
There is currently a legal challenge about certain elements of the relief, but that relates only to a position where someone who has no property interests – but otherwise qualifies for dwelling house relief – inherits multiple properties at the same time.
The situation on dwelling house relief is very simple and, for the benefit of your solicitor, can be found under section 86 of the Capital Acquisitions Tax Consolidated Act 2003.
This states that your daughter has every right to inherit the family home free of any tax as long as:
– it is your principal private residence – that is, your home – at the time of your death;
– she has lived there for the three years prior to your death;
– she has no interest in any other residential property at the time of your death (this is the section being challenged in court but, from your letter, it does not apply to you);
– and she must continue to live in the house for six years after she inherits. She can move homes as long as the full proceeds of selling your home are invested in the new property.
The Category A tax threshold on inheritances and gifts has absolutely no bearing on dwelling house relief. The whole point of the relief was to avoid a position where a child – often one who has acted as carer to parents and may therefore not been able to work normally outside the home – would be forced to sell a property that was essentially their home simply because its value exceeded the tax-free threshold.
If you are eligible for the relief, there is no tax.
About the only thing the solicitor got right is that the Category A threshold is currently €310,000. If your daughter qualifies for dwelling house relief, she can, in addition, receive assets under inheritance (or by gift) from a parent up to this threshold. The value of the house is not included in the calculation.
The advice from the solicitor is so poor that I think you should consider a complaint to the Law Society, which oversees the sector.
The society can investigate complaints against solicitors in a number of areas but, importantly, it includes a situation where the services provided are, to quote the society, “not of a quality that could reasonably be expected of a solicitor or a firm of solicitors”.
A complaint would, in the first instance, involve you writing to the solicitor, copied to the senior partner of their law firm, if there is one. This might sound like unnecessary hassle, but it should lead to a reduction in the fees charged.
If you do have to proceed to the Law Society, a full or partial refund or waiving of fees is one of the sanctions it can impose.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email email@example.com. This column is a reader service and is not intended to replace professional advice