Avoiding Future Problems with Will. Advice needed

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Onthebayou

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Hi Folks

I am doing my best to assist my friend in dealing with an estate issue that may arise in the future and I must admit I am having great difficulty working it out for her and not sure what advice to give but said I would put it down here for opinions, she will also seek advice from Tax Advisor.

The scenario is as follows

My friend and her sister have been named as joint executors and joint beneficiaries in their aunts will. The will states that aunts entire estate of whatever means to be left to her two nieces for their use absoloutely, it doesn’t specify how assets are to be split. The aunt is still alive but very ill and unable to communicate at this stage unfortunately.

The aunts estate breaks down as follows

House worth approx 750000

Cash in bank at approx 450000

Now this is where it gets complicated, my friend call her niece 1 has been living in aunts house for past two years and wishes to stay there and doesnt want the money, niece 2 is happy for niece 1 to live there and take house BUT wants to be reimbursed so that it splits 50/50 as there is difference in value of house and value of money, they have looked at drafting up a deed of family arrangement which would move niece 2s half share in house to my friend niece 1 and for my friend niece 1 to pass her half share in money to niece 2 her sister.

The question really applies to tax due and I can’t get my head around it as my understanding is that if they carry out the above deed that my friend will be liable for 33% CAT on house at 750000 and then will also have to give gift 300000 (the difference between value of house and cash) to her sister to bring them up to 50/50 which would be a colossal amount for one person to afford, She would plan to get a mortgage on the property to pay off revenue and her sister but again it’s a huge amount of money and I think she will put herself in serious debt. Please note both nieces have exhausted their gift tresholds from aunt through previous gifts of money.

My friend has said the above is possible but I am not so sure. Am i missing something here, is above possible in theory?

Thank you all for any opinions
 
My interpretation is as they are joint beneficiaries they should both be entitled to 50% of the total value of their aunts estate of €1.2mil .

They are both receiving €600,000 each and will have to pay CAT of €200,000 each. Your friend would need €350,000 mortgage, €150,000 to her sister and €200,000 to the revenue.
 
I’d work off splitting the estate between them including tax. That seems fairer?
 
They are both receiving €600,000 and net €400,000 in the example I gave so that would split the estate equally.
 
the wording in the will is important in how the aunt has expressed her wishes. they don't seem to have to split it 50 50. I recall a 3 brother will in which 1 brother took the house as his home and the other 2 brothers took the money between them. It was not an even split but it worked out fine for them all and they did not fall out over it.
 
Folks thank you all very much for the replies, David your explanation makes perfect sense thank you

Last question on this how likely is it for my friend to get a mortgage in this situation as I know this is not the run of the mill mortgage application, based on €350000 debts which consists of 200k Cat Bill and 150k to her sister to bring her up to 50/50 in inherited amount the Max Mortgage she would be eligible for based on 3.5 times wages is €270,000 she has good savings so should be able to get the other 80k together herself again just wondering how likely are these type of applications to be succesful?? I guess in her favour she would be owning a property worth 750000 while only looking for a mortgage of €270000 so the banks I imagine would look on that favorably?
 
Oh wow didn’t realise that and my friend never mentioned above so im assuming she’s not aware of the possible taxbreak, thats great to know, thank you.

Just again on my last post above i’ve been looking online at various banks and I can’t see any mention of mortgages specifically for purpose of paying inheritance tax bills/buying out someones share in a house, I saw some info from uk banks but nothing here, are these types of mortgage applications likely to be considered?
 
Last edited:
Onthebayou said:
Oh wow didn’t realise that and my friend never mentioned above so im assuming she’s not aware of the possible taxbreak, thats great to know, thank you.

Just again on my last post above i’ve been looking online at various banks and I can’t see any mention of mortgages specifically for purpose of paying inheritance tax bills/buying out someones share in a house, I saw some info from uk banks but nothing here, are these types of mortgage applications likely to be considered?
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No worries. Will respond tomorrow when in work.
 
I have never heard of specific mortgages for paying inheritance tax bills, I think you will have to try around all the banks or ask a broker. I know where I worked there was a policy of not lending to pay tax bills, while you could see the sense of that for ordinary tax bills, inheritance tax is kind of different but the blanket policy banned all.
 
Would be best if Niece 1 inherited the house with zero tax. Niece 2 pays tax out of the cash. Niece 1 then gifts to her sister the difference to make it 50/50 on an annual basis. But if the aunt is too ill to change her will than this may not be possible. A legal and tax expert would be very cheap when we are talking of the figures the OP mentioned. Surprised nobody has already spoken to one.
 
Its easy to see given the above example how a simple will could have the potential of doing more harm than good to the benefactor's and their ongoing relationship with each other
When deciding what's fair, is it the gross inheritance or the net inheritance ???
 
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