ARF and inheritence



My father has an ARF which he would like to leave to my mother when he dies. The revenue site says that when a person dies, if the money is put into an ARF for the spouse, it is transferred tax free but if it is given as cash to the spouse, it is treated as income of the deceased and taxed as such.

My question is: does my father's will have to specify that his ARF should be put into an ARF for my mother or can the executor decide to do this? If he doesn't specify an ARF for her in his will, will the ARF automatically be converted to taxable cash?

At the moment, my father's will just says that everything is left to my mother.




Effectively your mother would automatically "step into the shoes" of your father in terms of the ARF. The ARF is in effect transferred to an ARF in your mother's name and she has all the options your father had (e.g.draw down income -subject to tax). The actual transfer to your nother's ARF is tax free, but if she chooses to encash it all , there will be an Income Tax hit.
On your mother's death, the value must be encashed (subject to a 20% tax hit) and paid out to children.


ARF for spouse

I'm not certain that what Conan says is true, though I would welcome other comments.

My understanding is that the Revenue will allow an ARF to pass tax free to a spouse on death, but this does not mean that it will automatically happen. I think an ARF will pass directly to a spouse on death only if it is structured as such from the start. Many ARFs are life insurance policies, which automatically end on the death of the holder.