ARF & Tax On Death

ARF & Tax On Death

Can anyone confirm for me the situation with regard to tax on inheriting an ARF.

As I understand it children over 21 are exempt from Inheritance tax but must pay income tax.

Is that income tax on any funds drawn from the ARF, or do they pay income tax on the full value of the ARF in the year that they inherit it.

What I'm trying to get my head around is whether a person inheriting an ARF can keep the value in the ARF, perhaps drawing a small income from it, and essentially never pay tax on the capital assets inherited in the ARF. Only paying income tax on whatever is drawn out.

The TAB guide is not explicit about this.

In theory if you can avoid paying tax on the capital in the ARF, the ARF could be passed from generation to generation giving income to each generation, with no tax ever being paid on the capital.

-Rd

ARFs and Tax on death

No ...you can not maintain the ARF. The ARF provider has to deducte tax @ 20% from the full value going to you, what you then inherit (i.e. 80% of value) is then free of Income Tax and Inheritance Tax in your hands.

You have no option to keep the ARF goign and draw from it when and as you want to. A spouse of deceased effectively has this option ...but not children.

Thanks

Thanks for clearing that up.

It sounded a bit too god to be true.

-Rd