CAT on inherited property ?

L

landlord

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if a jointly owned rental property is passed from father to son on death, is the CAT due on the fathers half of the property calculated after his half of the outstanding mortgage is deducted?
Does CGT play any part?
 
Mortgage is irrelevant. Ignore it.

No CGT on assets passed at death.

CAT maybe, but no CGT.
 
I am not sure I understand.....let's say a house is willed to you worth 500,000 and it is in negative equity by 100,000 euros. Once you take possession, if you wish to sell it immediately, Will you have to pay the 100,000 Euro negative equity yourself AND also pay the CAT on the 500,000 (assuming you have already exceeded the relevant group threshold)?
 
You are suggesting that the owner had a mortgage when they died?

In that case, the MPP pays the mortgage.

If no MPP, as seems the case here, as it is a rental property, then the estate pays the debts off, AFAIK.
 
Duties of executor or administrator
Generally, you are obliged to distribute the assets as soon as possible after the death (within a year if possible - you may be sued by the beneficiaries if you do not distribute the estate within a year). This may not be possible if there are legal issues to be decided).

You are under a duty to preserve the assets of the deceased until they are distributed and to protect the assets from devaluation. For example, you should make sure that all assets are properly insured.

You have power to:

  • Deal with the estate (for example, to sell it to pay debts or distribute amongst beneficiaries)
  • Represent the deceased in legal actions and to settle legal actions against the deceased's estate
You must:

  • Gather together and protect all the deceased's assets such as money, shares and property and find out their combined value
  • Call in any outstanding funds due (money owing to the deceased)
  • Pay any debts or taxes owed
  • Pay the funeral expenses
  • Make sure that the spouse (or civil partner) and children know about their legal right share
  • Make sure the entitled beneficiaries or next of kin get what they are entitled to, and that ownership of property is passed on correctly.
 
So the executor of the father's estate must repay the mortgage before any assets are distributed.
 
If the deceased dies in debt
If the deceased dies insolvent or there isn't enough money to meet the bequests made, payments from the estate are prioritised in the following order:

  1. Funeral, testamentary and administration expenses
  2. Creditors who have security against the property of the deceased in the form of a mortgage, charge or lien (these are different ways of securing loans)
  3. Rates and taxes due at the testator's death, wages and salary for work done for the deceased within four months of death and sums payable by the estate in respect of contributions payable by the deceased in the twelve months prior to death under social welfare legislation (their own PRSI contributions as well as PRSI contributions for employees)
  4. All other creditors.
Where the deceased dies in debt, creditors can only bring a claim against the estate of the deceased. Even if there isn't enough money in the estate to meet all the debts, the relatives of the deceased are not personally responsible or liable for the deceased's debts (unless, of course they had guaranteed them).
 
landlord said:
I am not sure I understand.....let's say a house is willed to you worth 500,000 and it is in negative equity by 100,000 euros. Once you take possession, if you wish to sell it immediately, Will you have to pay the 100,000 Euro negative equity yourself AND also pay the CAT on the 500,000 (assuming you have already exceeded the relevant group threshold)?
Click to expand...

So to be clear, the house is worth 500000 but there is a charge on it for 600000? A beneficiary cannot be compelled to accept an inheritance so it would be madness for the beneficiary of this house to accept it and pay the charge. From the viewpoint of the lender, they can take the 500000 and, if there are other assets in the estate, seek payment of the balance from the estate.
 
Protocol said:
You are suggesting that the owner had a mortgage when they died?

In that case, the MPP pays the mortgage.

If no MPP, as seems the case here, as it is a rental property, then the estate pays the debts off, AFAIK.[/QUOTE
Click to expand...



What is MPP?
 
Mortgage Protection Policy, required on all PPR mortgages.

It pays off the mortgage if the borrower dies.

MPP is not required on non- PPR mortgages.
 
My first example was a little extreme.

These are the exact figures
Investment property worth 220,000 and jointly owned with father.
Mortgage currently 240,000. If my father were to pass tomorrow (it does feel very uncomfortable talking about this!!!)
and I do not intend to sell the property, does then his estate pay off his half of the mortgage? I then pay CAT on his half of the value of the property?
 
It depends on the circumstances. Is it owned as joint tenants or tenants in common. Does his will specify that the mortgage be paid from the estate or not. In short, your dad is alive, he needs to take legal advice now and make a will to suit his wishes.
 
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