Will my son pay higher rate of inheritance tax?

 

Q&A: I have a house which is probably worth, depending on luck, €350,000 which I intend to leave to my son who is presently occupying same but there is a mortgage (interest-only) of €300,000 on it. My question is: if my son gets the house valued at €350,000, which would be over the tax allowance of €250,000, but because of the mortgage the net gift is only €50,000, would the Revenue in calculating value of inheritance have regard to the mortgage on house which would fall to be paid by son?

Because of his low income, my son would have to take out a loan to pay inheritance tax if the full value of house is used.

Mr P.G., email

I am aware that there are some mortgages on which life assurance is not applied but these are very much the exception. To be honest, I would imagine just a handful of Irish mortgages are not covered by insurance – and all these would effectively be remortgages for older people.

I would be certain that someone in your position would have a life policy attached to the mortgage under the terms of which the mortgage will be paid off in the event of your demise.

Thus, your son would be receiving the property unencumbered and could therefore be liable to capital acquisitions tax.

However, you also note that he is living with you in the property. If he has done so for the three years ahead of your death, has no financial interest in any other property and stays living in the property for a further six years after your death, then he qualifies for an exemption to CAT.

Of course, if he breaks the terms of the exemption, the tax would fall due, even if it was several years after your death.

What threshold applies to kids of divorced couple?

A divorced (in Ireland) couple marry (in Ireland), both of them having had children with their previous partners, but have none together.

If one of them dies and leaves an inheritance equally between the children, what is the threshold level applicable?

Are they all entitled to the €250,000 child/parent threshold? Or is it only the direct blood descendants who are entitled to this and the others only get the “stranger” threshold of €16,750?

Mr K.O., Dublin

To be frank, I though I had by now covered every possible permutation on inheritance tax but I certainly haven’t come across this one before and, in modern Ireland, it is surely a matter relevant to a growing number of people.

Category A threshold is designed to cover inheritances and gifts specifically between a parent to their children, not children of a subsequent partner.

However, if these two divorced people subsequently marry, all their respective children are deemed to become stepchildren and the Revenue assures me that, as such, they would each be able to avail of the category A threshold.

The key point here is that the couple marry, rather than simply have a relationship.

How can I encash share cert that is no longer valid?

I have just come across an old share certificate for Vodafone shares. A broker has informed me that it is no longer valid. He maintains that I must have received a new cert at some stage. As I have moved house a couple of times, I don’t have it. The amount of shares involved are 200.

Can you please advise me as to how I might encash them if that is possible. I purchased the shares in 2001.

Mr M.B., email

You need to contact the company registrar, which is a company called Computershare. Essentially, Computershare manages Vodafone’s register of shareholders.

When shareholder events are triggered – like the payment of a dividend cheque, the issue of documents ahead of an agm, or whatever, the details are mailed to the shareholder at the address registered with the registrar.

If you have moved regularly, it may be that your Vodafone mail has been sent to an address you no longer occupy. Check with Computershare at Heron House, Corrig Road, Sandyford Industrial Estate, Dublin.

It is a problem because you cannot sell the shares without a valid share certificate. Back in 2006, there was a share reorganisation designed to return some money to shareholders – a form of share buyback.

Basically, Vodafone replaced every eight ordinary shares you held in the company with seven new shares and eight B shares.

The seven new ordinary shares are treated in the same way as your previous shareholding and can be held and/or traded as normal. The new B shares were used to return money to investors in one of three ways. It is too complicated to go into at this stage as all three options are now exhausted. Suffice to say, if you did nothing, the company sold the B shares and you received 15 pence sterling (then worth about 21.6 cent) per B share.

This was treated as a capital gain and subject to capital gains tax at 20 per cent at the time – if you had capital gains in excess of €1,270 that year.

As part of this reorganisation new certificates were issued by Computershare. If your certificate is missing – and has not been used to sell the shares you think you hold – it will probably cost you to replace the certificate.


This column is a reader service and is not intended to replace professional advice. Please send your questions to QA, c/o Dominic Coyle, The Irish Times, 24-28 Tara Street, Dublin 2, or to dcoyle@irishtimes.com. No personal correspondence will be entered into.

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