ARF on death

[Roro999]

I think if not stipulated in a will the ARF (say 200k value) transfers to a surviving spouse in its entirety and is'nt taxable. Correct ?

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 ?

 

[GettingOn]

There are many people on here better qualified to comment on your question, but my understanding is that it's dangerous to assume the ARF transfer to spouse isn't taxable. If the ARF has US Assets in it, US Federal Estate Taxes are payable, if those Assets have a value of greater than $60,000 and you are not a US citizen. I am only aware of the US being an issue, but that's not to say that other countries don't pose similar issues.

 

[AAAContributor]

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

 

[Freelance]

I think if not stipulated in a will the ARF (say 200k value) transfers to a surviving spouse in its entirety and is'nt taxable. Correct ?

That's not correct I'm afraid. See the following:

If you leave the funds to your spouse or civil partner, the funds can be transferred to an Approved Retirement Fund in their name.

In all other cases, the funds are wound up and the proceeds are passed to your estate.

So if you explicitly specify in your will that you ARF is to go to your spouse/civil partner, it is transferred in full to an ARF in their name, with no tax payable. Otherwise it will be wound up and treated as part of your estate. Tax may be payable.

More here

 

[Steven Barrett]

If it is left to your spouse, it becomes an ARF in her name and the income taken out is taxed as income. The same as it is in your hands.

If it goes to your kids, it is as AAA has laid out.

 

[Deauville]

That's not correct I'm afraid. See the following:



So if you explicitly specify in your will that you ARF is to go to your spouse/civil partner, it is transferred in full to an ARF in their name, with no tax payable. Otherwise it will be wound up and treated as part of your estate. Tax may be payable.

More here

Thanks for the heads up.
I had been under the impression that my existing will with instruction that everything passes to my wife was all I needed.
If I understand you correctly, I need to change my will when I take out an ARF and specify the ARF separately.

 

[Steven Barrett]

Thanks for the heads up.
I had been under the impression that my existing will with instruction that everything passes to my wife was all I needed.
If I understand you correctly, I need to change my will when I take out an ARF and specify the ARF separately.

What you have it fine.

There may be some confusion on the passing of the ARF "tax free" to the spouse. Yes, the ARF does pass to the spouse without triggering a tax liability. But if the spouse wants to actually take money out of the ARF, it is taxed under PAYE.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[Freelance]

Thanks for the heads up.
I had been under the impression that my existing will with instruction that everything passes to my wife was all I needed.
If I understand you correctly, I need to change my will when I take out an ARF and specify the ARF separately.

Hi Deauville, the advice from my solicitor was to make it explicit, which is what I did.

 

[8till8]

If it is left to your spouse, it becomes an ARF in her name

where an ARF is being transferred to a spouse, do the investments within the deceased person ARF have to be sold/turned into cash or can the contents of the ARF be retained?

 

[ClubMan]

where an ARF is being transferred to a spouse, do the investments within the deceased person ARF have to be sold/turned into cash or can the contents of the ARF be retained?

This article might help.

You, Your Approved Retirement Fund (ARF), Your Will and Your Dependents….

If you are retired, you may have an Approved Minimum Retirement Fund (AMRF), Approved Retirement Fund (ARF), or both. While there are some technical differences between AMRFs and ARFs ...

www.rbk.ie

 

[Steven Barrett]

where an ARF is being transferred to a spouse, do the investments within the deceased person ARF have to be sold/turned into cash or can the contents of the ARF be retained?

It depends on the provider. Some with start a new ARF in the spouse's name. They will transfer the value (which means cashing in the old one) and the spouse can choose their own funds or continue with the old ones. Others can simply change the name. Self directed ARFs will do an in specie transfer so nothing is sold.

 

[Louisval]

Hi Steven,

Do you know what AVIVA do?

 

[Deauville]

Thank you Steven, ClubMan and Freelance for your contributions.
Any informed opinion of the wording attached current Will meeting requirements for ARF continuation in spouse name or do I need to pay a solicitor a visit (and a fee) to change my Will ?

 

[Steven Barrett]

I'm not a solicitor but it looks fairly clear where the assets are going...to your wife. Your estate will have to go through probate and then it will become an ARF in her name. It is then up to her on where she invests it. She can even take it all out in taxed cash if she wants.

Hi Steven,

Do you know what AVIVA do?

I don't know

 

[ClubMan]

or do I need to pay a solicitor a visit (and a fee) to change my Will ?

It shouldn't cost that much to ensure that your will is legally sound and it may be worth the peace of mind.