Renouncing inheritance and tax implications

Older relative (lets call him Jake) posed an interesting question to me today; and I didn't have much of an answer.

Jake is widowed and has two adult children (Jack & John). Jack has for his own reasons estranged himself for a number of years. Jake has had little success in his attempts to reconnect.

As of now, Jake's will simply leaves all his estate to be divided equally between his two offspring. He does not wish to change that. Divided in equal shares, neither son is likely to have to pay much (if any) inheritance tax.

His concern is if Jack renounces his share, that John will have to pay a significant chunk of tax, given that he will become the sole beneficiary in this scenario.

Is there anything that Jake can do to avoid this possible tax liability? He accepts that Jack is free to make this choice; but is not happy to see his hard-earned disappear into Govmt coffers.

No, there isn’t.

What you’re saying is that, for example, the father has €800k.

His two sons might inherit €400k each and pay very little CAT.

But if one of them inherits the entire €800k, he will obviously pay more tax.

That’s the long and the short of it.

If he wants so desperately to avoid tax, he could change the will as follows:

1) Half the proceeds to Son A
2) Half to Jack but in the event that he disclaims it, the half to go to "a nominated charity"

Brendan

Why would Jack renounce a windfall of several hundred thousand euros?

Assuming all is fine with relationship could each Son receive their half share and then in a separate transaction 1 son gift his share to the other Son.

NoRegretsCoyote said:

Why would Jack renounce a windfall of several hundred thousand euros?

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I have no idea why he might do that; just as I have no idea why he has chosen to estrange himself from his family.

john luc said:

Assuming all is fine with relationship could each Son receive their half share and then in a separate transaction 1 son gift his share to the other Son.

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Would that not still mean John has to pay tax on the gift from Jack?

Thirsty said:

have no idea why he might do that; just as I have no idea why he has chosen to estrange himself from his family.

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Well if you browse this forum you will find that estrangement rarely stops people from exercising their rights to an inheritance

NoRegretsCoyote said:

Well if you browse this forum you will find that estrangement rarely stops people from exercising their rights to an inheritance

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I wouldn't know; the question was put to me by a relative, hence my post here.

Does the estranged son have kids? If he’s worried about the son rejecting the inheritance, he could skip a generation.

Not so far as we know, but that's a thought; I guess Jake could write in as an additional clause?

Thirsty said:

Would that not still mean John has to pay tax on the gift from Jack?

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Well first assuming no CAT allowances were used up then each would first apply CAT A and then second son gifts his half share and brother uses CAT B AND 3K gift allowance. This only makes sense if there was no fighting and the amounts in evolved stay inside CAT allowances.