Paying tax on inherited property

[Shawady]

I have a query on behalf of a relative that I would appreciate some advice/comment on.
I have not got all details but here goes.

A relation of mine passed away 3 years ago and had no partner and children so left the house to be divided between 4 siblings i.e. a 25% share each. One sibling was designated the excecutor of the will and registered the property at the time at its current value at 500K. Through a combination of reasons, the house is still on the market but obviously worth a lot less than 500K, possibly 250K max. My relative is one of the people with a 25% share but has now been told they are liable to tax at the original valuation, which would amount to 18K. They have been told that by the time the interest and tax is paid they will basically get nothing.

It sounds unfair to me to have to pay tax on on a value that only ever existed on paper. If anyone with knowledge of this area of law I would appreciate any comments.

 

[mathepac]

... My relative is one of the people with a 25% share but has now been told they are liable to tax at the original valuation, which would amount to 18K. ...

Told by whom - Revenue, a tax accountant, a guy in the pub?

 

[Shawady]

Told by whom - Revenue, a tax accountant, a guy in the pub?

Hi Mathepac,
The sibling that is the excecutor of the will has been dealing with the solicitor and estate agent has told the other siblings this is the case. He says the solicitor has confirmed the tax has to be paid on the value put on the property 3 years ago rather than what it may eventually sell at (which will be considerably lower).

To me this seems unfair as the other siblings had no idea this was the case. They had no control over the sale of the house and are now afraid to question what they are being told as they don't want a family row, as it now appears the excecutor made a mess of the whole thing.

 

[Towger]

Sounds about right, except they will still get the bulk of the money. I don't have the details to hand but from memory the interests is calculated on a daily basis. If is only 3 years ago... So at the end of the day they may end up with a interest bill of about 5k.

 

[mathepac]

... it now appears the excecutor made a mess of the whole thing.

I wouldn't argue with that, all of which may leave the executor liable for the losses incurred by the other beneficiaries if they choose to take action against him. The normal expectation (from a legal and Revenue perspective) is that the the estate gets finalised within 12 months. If there were exceptional circumstances that delayed matters, the executor needed on-going contact with Revenue, explaining those reasons. It may now be too late, but appealing the decision may still be possible, but it cannot be delayed.

I suggest the beneficiaries write a registered letter to the executor detailing what has happened and what he has told them and requesting a joint meeting with the solicitor to try and plan a rescue mission. They need to put a time-limit on arranging this meeting and if the time-limit passes, they should probably look for their own solicitor.

It all may seem unfair and messy but not knowing what the law is regarding inheritances unfortunately does not constitute a defence.

 

[Shawady]

Thanks for comments.
I aggree with a lot of what you have said, Mathepac. I have suggested they all meet with the solicitor to get a clear picture of they are entitled to and what tax they are liable for.
I think what happened here is, the other beneficiaries did not want to probe the executor too much at the beginning because (a) he was family and did not want to be seen to be not trusting and (b) this person gave the impression they knew what they were talking about, which has turned out not to be the case. This has turned out to be an expensive mistake.

 

[csirl]

registered the property at the time at its current value at 500K.

Am I correct in saying that the beneficiaries chose to have the property registered in their names rather than having it sold within 12 months as an executors sale?

If so, then once the property became vested in the beneficiaries, the executors role ended. Any tax that was due at that time was a matter for each of the individual beneficiaries in their individual dealings with Revenue. Surely the fact that the owners of the property have it on the market 3 years later at a lower price has nothing to do with the original transfer from estate to beneficiaries and cannot be taken into account.

 

[tenchi-fan]

Not that I trust estate agents, but when I was dealing with an estate agent she told me that one house i was looking at was "not going to get the €180k, but it's an executor sale and there are 3 people involved who want €60k each and they're in no hurry to sell"
It's now listed at €140k and still not budging.

Who's to say what's fair and what isn't. They had 3 years to sort it out. Would i be right in saying if the value increased they would be liable to capital gains, which is higher and doesnt have an exemption limit like inheritance from a family member does?

 

[Shawady]

Am I correct in saying that the beneficiaries chose to have the property registered in their names rather than having it sold within 12 months as an executors sale?

I think what happened in this case was that other siblings were not aware of any financial implications and just assumed they would be liable for some tax when the proprty was sold.
The relative I am asking the question on behalf of is a good person and was afraid to push the executor at the early stages in case they were seen to be difficult. IMO this was a massive error. If they had realised tax would have to be paid on the value 3 years ago, they would have pushed sooner for a quick sale.
I think they have learned an expensive lesson.

 

[tenchi-fan]

I think what happened in this case was that other siblings were not aware of any financial implications and just assumed they would be liable for some tax when the proprty was sold.
The relative I am asking the question on behalf of is a good person and was afraid to push the executor at the early stages in case they were seen to be difficult.

The executor was also a sibling though! Their responsibility was to carry out the will i.e. split the house 4 ways. Which they did! Their job wasn't to be an expert on tax, or to purchase expert financial advise at considerable (personal) expense. I know a lot of executive sales drag out for ages but sometimes it's just because no one is in any real hurry, which seems to be the case in this situation.

 

[Joe_90]

One sibling was designated the excecutor of the will and registered the property at the time at its current value at 500K. Through a combination of reasons, the house is still on the market but obviously worth a lot less than 500K, possibly 250K max.

"Registered the property" does this mean filed the IT38 forms. The inheritance Tax is due within 4 months of the valuation date. Has the combination of reasons resulted in the property not being vested in the beneficiaries?
If the asset was available for sale at €500k and that was the value at the date of death then the Inheritance is €500K. I think you need to talk to the solicitor they should have advised the beneficiaries about their liability.