If I put in my Will that it's to be distributed to my children can it form part of their individual 335k limits and wouldn't be taxable. Correct ?
The tax treatment of the inheritance of an ARF by a child of the ARF-holder
depends on the child's age.
Under 21
Income Tax:
If the child is under 21 at the date of death, the distribution of the ARF amount is exempt from
income tax (Ref 1).
Inheritance Tax:
There is no exemption from
inheritance tax (Ref 2).
However, if the benefit received by the beneficiary is less than the Group A threshold, then there is no tax payable.
Over 21
Income Tax:
If the child is over 21 at the date of death, the ARF administrator is required to deduct
income tax at a rate of 30% before making a distribution of the ARF (Ref 3).
So, in your example, income tax of €60,000 would be deducted from a €200,000 ARF, with a net €140,000 paid to the child.
Inheritance Tax:
No further tax is due.
A child who is over the age of 21 is exempt from
inheritance tax on the inheritance of an ARF (Ref 4).
Ref 1: Section 784A(4)(b)(ii) TCA
Ref 2: Section 85 CATCA
Ref 3: Section 784A(4)(c) TCA
Ref 4: Section 85(2)(b) CATCA