ARFs & AMRFs

[MrEarl]

Hello,

An old friend is seriously ill and is trying to make arrangements in case of their death. They have both an ARF & AMRF (min. balance of €63.5k).

What they are wondering is:

1. What is the situation in respect of assets held in both their ARF & seperately their AMRF, if they die - will the assets be paid to their estate (even if not specified in their will) or should they nominate a beneficary and advise the Trustees ?

2. What are the tax implications of the above (in respect of Inheritance Tax and possibly Income Tax / CGT) for the benificaries ?

3. If they current pensioner has received notice that they are terminally ill (say 12-months to live) can they now encash both the ARF & the AMRF now without any tax liability ?

Many thanks.

 

[Steven Barrett]

Just saw this after answering your previous CAT question.

1. What is the situation in respect of assets held in both their ARF & seperately their AMRF, if they die - will the assets be paid to their estate (even if not specified in their will) or should they nominate a beneficary and advise the Trustees ?

The ARF & AMRF form part of his estate and goes through probate. If he is married and it goes to his spouse, the AMRF becomes an ARF. Both policies pass over and become an ARF in the spouses name. Income tax is paid as she draws down the benefits.

2. What are the tax implications of the above (in respect of Inheritance Tax and possibly Income Tax / CGT) for the benificaries ?

No CAT if going between spouses. Income tax as she draws down the benefits.

If it goes to kids over 21 years of age, they pay tax of 30% of the value of the ARF. It stays outside the CAT limits.

If it goes to kids under 21, it is liable to CAT but not income tax.

3. If they current pensioner has received notice that they are terminally ill (say 12-months to live) can they now encash both the ARF & the AMRF now without any tax liability ?

Regardless of health, they can cash in their ARF at any time. The Revenue do not have any power to allow someone to cash in their AMRF before the age of 75. They can of course, take out any growth.

There is no exemption for avoiding paying tax based on terminal illness.

If you need anything else, let me know.

Steven
www.bluewaterfp.ie

 

[MrEarl]

Thank you Steven,

Those answers are very helpful. As you will have read from my other thread, they are meeting their various advisors next week so just wanted to help point them in the right direction.

Again, my thanks.

 

[Steven Barrett]

Your very welcome. It's a difficult time for your friend and he is doing the right thing in getting things organised.

If his family use his ARF to provide an income, he should be aware that once the insurance company are officially told of his passing, they will stop the payments until probate is sorted.


Steven
www.bluewaterfp.ie