Inheritance tax due by Life Interest holder and the remainderman

[charlie890]

Hi, Looking for some advice on this scenario.

Person A leaves a property to Person B, with Person C to have a life interest (exclusive use) in said property until Person C is deceased at which point the property passes into absolute ownership of Person B. I understand Revenue would refer to Person B as the 'remainderman'.

Q1: What inheritance tax is assessable for Person C? : From revenue notes, it suggests a life interest is a limited interest, so the property value is multiplied by a factor (which e.g. is about 0.5 for a 65 year old male) to get to the value assessed for inheritance tax. So, if value of property at the time of A's death is 500k, the value to be assessed for inheritance tax for Person C (age 65, male) would be about 250k, Is that right?

Q2: What inheritance tax is assessable for Person B, what property value is used and when is any inheritance tax due? : From revenue notes, it suggests the event date for the inheritance tax assessment would be the date of death of Person C, is that right? Does Person B then become liable to being assessed for inheritance tax on the property value at that time, and does Person B continue to benefit from any exemptions applicable from the inheritance having come from Person A (e.g. parent)?

Hope that's not too much and appreciate any comments.

 

[Curlywurly]

Not an expert in this by any means but do recall dealing with similar previously. What you have said at Q1 is correct. As in you are applying the correct method. I am not sure what the multiplier is but it is set out on Revenue website.
C then completes the IT38 form regarding his CAT liability using the value computed as stated above and subtracting whatever tax free threshold that applies to him based on his relationship to the deceased reduced by any prior gifts / inheritances received in that same group threshold.
Re Q2: The interest passing to the Remainder man B only kicks in on the death of the life interest C. It is at that stage that the Remainder man B’s liability to CAT begins, It is when C’s estate is being probated that the life interest questions will have to be answered. All the necessary dates, property values, details of remainderman, copy of A’s will etc will then have to be supplied on C’s Revenue Affidavit ( SA2 online form) B will then be listed on C’s Revenue Affidavit as a beneficiary of the property using full market value of property at date of death of C. When B is completing the IT38 Form re his CAT liability he will be given whatever threshold applies to him in respect of his relationship to the deceased person A. You can always email Revenue cat section at catdr@revenue.ie with any questions you have just to be sure so you don’t run into any penalties for late payment of CAT .