ARF/AMRF taxation on death

T

take the cash

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What income tax is payable and by whom when a person dies and their existing ARF and AMRF are inherited by their spouse. Is it possible, if the deceased paid no income tax (on disability benefit) in year of death that no income tax would be payable?
 
According to The Pensions Authority:
"Benefits payable from AMRF/ARFs can be passed to a spouse or civil partner without payment of CAT or income tax. (A tax rate of 20% applies subsequently on the death of the spouse or civil partner).

Benefits payable to a child under 21 are subject to CAT but not to income tax.

Otherwise AMRF/ARFs are treated as if they had been drawn down on death and are subject to marginal rate income tax (or 30% if inherited by a child over age 21) and also Capital Acquisitions Tax if inherited by strangers."

I take it that being passed to a spouse means its not drawn down . If drawn down income tax applies.
 
My query was not clear enough. If the widow (in this case) decides to draw down the funds and if her late husband had no tax liability in his final year, what rate of income tax applies? Is it possible for the marginal rate of income tax to be zero?
 
AMRF becomes an ARF in the wife's name. ARF becomes an ARF in the wife's name. She then draws income from it which is taxed as income under the PAYE system. If she draws down all the funds, she will be taxed at the marginal rate (probably 40%) plus USC plus PRSI if she is under age 66.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Thank you both for your help, but I'm still not clear.
Steven, can you elaborate on your last sentence. She is being advised that, because her late husband paid no tax in year of death the marginal rate is zero and no tax is payable. She would have paid PAYE in her own right in the same year. Therefore, she can take the full amount of cash and invest as she pleases (less PRSI and USC). Can this be correct?
 
As I understand it she can have the ARF transferred into her name tax free( with whatever financial institution is managing the ARF) and anything she draws down in the future will be taxed at her marginal rate. While her late husband did not have a tax liability when he died - if he had drawn down some funds from the ARF he could be liable for tax depending on the amount he received.
 
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