LAWLINK: Inheritance inflation concerns

Q: My father, who died in late 2019, had a small home in Limerick city centre where I lived with him as a carer. He had a small sum of money in the bank and credit union which went towards paying for his funeral expenses and the balance was paid by myself and my siblings. We agreed that I would buy the house from my siblings for an agreed sum. When Covid hit, we took our eye off things and have not taken any other steps, although I have long since paid over the money. I continue to live in the property which has increased substantially in value. What should I do?

A:You should consult with your solicitor as soon as possible. You need to ensure that what you are suggesting is allowed under the will, if one exists. The executor will have to take steps to extract a document that will allow you to deal with the estate.

Your dad’s marital status, whether he made a will, and the terms thereof will all need to be considered.

For the purposes of probate, the valuation should be as on the date of death of your father.

Capital Acquisitions Tax (CAT) arises in the cases of gifts or inheritances. Unless the value of the home was substantial, it is perhaps unlikely that you or your siblings will be liable for CAT on the inheritance.

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If the property was sold to you at a discount, that discount itself might be classed as a gift to you from your siblings. Equally, it is possible – although perhaps unlikely – that the sums paid by you to your siblings could be classed as a gift from you to them, and again potentially subject to CAT.

If the transaction between you and your siblings was finalised only some time after the death of your father, and the property rose in value, it is possible that the Revenue would consider it a capital gain, and that Capital Gains Tax (CGT) would apply.

Your solicitor should be in a position to draft an appropriate Deed of Family Arrangement to ensure that any potential tax implication is minimised. You should also try and obtain copies of any funeral, wake, or headstone expenses you or your siblings paid as these might be important in calculating final tax figures.

As you can see, there are many potential difficulties that you might encounter.

A failure to deal with the matter may result in not only a tax bill for you and your siblings, and interest and penalties on the same, but would also ensure that you are not registered as owner of the property.