Wife inheriting shares with capital gains

Brendan Burgess

Brendan Burgess

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If a man dies with a share portfolio in his own name, the capital gains disappear. So his estate doesn't have to pay CGT.

I assume it doesn't matter if the wife inherits the shares? I assume she does not have a base cost of the original cost of the shares?

If so, then it's good tax planning for a husband and wife to own their assets separately and never jointly. I am surprised that I have not heard this planning point before.

Which brings me to another issue - is there a good tax planning guide for married couples?

1) Both should have income to use up the 20% tax band from joint assessment
2) Both should consider giving their children €3,000 a year to use the small gift exemption from CAT
 
Brendan Burgess said:
If so, then it's good tax planning for a husband and wife to own their assets separately and never jointly. I am surprised that I have not heard this planning point before.
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You lost me at this point Brendan.

It's regarded as bad planning for assets to be held separately when there is an option to hold them jointly.
 
If Mr and Mrs Jones buy €100k worth of shares jointly which are worth €200k when Mr Jones dies, what is the acquisition cost for Mrs Jones when she goes to sell the share? I assume €100k.

If Mr Jones buys €50k worth of shares and dies when they are worth €100k, then Mrs Jones gets them at an acquisition cost of €100k.

Brendan
 
Brendan Burgess said:
If Mr and Mrs Jones buy €100k worth of shares jointly which are worth €200k when Mr Jones dies, what is the acquisition cost for Mrs Jones when she goes to sell the share? I assume €100k.
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No, she'll have acquired half of them (her own share) for €50K and the other half (her late husband's share) at €100k. So the base cost is €150k

I'm amazed that you're promoting a very bad tax and estate planning idea here.
 
If they're gifting their children €6,000 pa they already know that the children are going to be paying CAT on the value of the shares (on inheritance) anyway.
 
T McGibney said:
No, she'll have acquired half of them (her own share) for €50K and the other half (her late husband's share) at €100k. So the base cost is €150k

I'm amazed that you're promoting a very bad tax and estate planning idea here.
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Thanks Tommy.

Not promoting it at all. Asking about it. And you have clarified it.


Brendan
 
Brendan Burgess said:
OK, so it's an administrative advantage rather than a tax advantage.
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Ah come on Brendan. Did you even read what I wrote above?

Brendan Burgess said:
If Mr and Mrs Jones buy €100k worth of shares jointly which are worth €200k when Mr Jones dies, what is the acquisition cost for Mrs Jones when she goes to sell the share? I assume €100k.

If Mr Jones buys €50k worth of shares and dies when they are worth €100k, then Mrs Jones gets them at an acquisition cost of €100k.
Click to expand...

T McGibney said:
No, she'll have acquired half of them (her own share) for €50K and the other half (her late husband's share) at €100k. So the base cost is €150k
Click to expand...
 
I did read it but maybe I misunderstand you?

There is no tax difference if I understand you correctly.

If they buy them jointly, the acquisition cost will be €150k

If they buy them separately, Mrs Jones half will have an acquisition cost of €50k and the half she inherits from Mr Jones will have an acquisition cost of €100k? So, it's the same.



Brendan
 
Brendan Burgess said:
I did read it but maybe I misunderstand you?

There is no tax difference if I understand you correctly.

If they buy them jointly, the acquisition cost will be €150k

If they buy them separately, Mrs Jones half will have an acquisition cost of €50k and the half she inherits from Mr Jones will have an acquisition cost of €100k? So, it's the same.



Brendan
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OK. whatever Brendan.
 
Brendan Burgess said:
If a man dies with a share portfolio in his own name, the capital gains disappear. So his estate doesn't have to pay CGT.

I assume it doesn't matter if the wife inherits the shares? I assume she does not have a base cost of the original cost of the shares?

If so, then it's good tax planning for a husband and wife to own their assets separately and never jointly. I am surprised that I have not heard this planning point before.

Which brings me to another issue - is there a good tax planning guide for married couples?

1) Both should have income to use up the 20% tax band from joint assessment
2) Both should consider giving their children €3,000 a year to use the small gift exemption from CAT
Click to expand...
Great point, never occurred to me.
 
It’s good tax planning to have assets carrying big latent gains in the sole name of the deceased spouse. The capital gain just washes away.

The problem is knowing who’ll die first, but that’s often signposted.

There can also be opportunities when one spouse has high or no income.

The administration point around Wills etc is always an issue; one should always leave enough cash or value accessible for the surviving spouse.

Protecting entitlement to benefits may also be relevant.
 
Gordon Gekko said:
It’s good tax planning to have assets carrying big latent gains in the sole name of the deceased spouse. The capital gain just washes away.
Click to expand...

Thanks Gordon

Case 1
So Mr and Mrs are 50 and are healthy and have €100k to invest.

At this stage, it does not matter, for tax planning purposes, whether the shares are owned jointly or individually - assuming both have other income which uses up the 20% tax band.

So they buy them jointly for administrative reasons.
The shares increase in value to €300k and Mrs dies suddenly.
Now the cost of Mr's portfolio for CGT purposes is as follows
His wife's share at €150k - the Capital Gains have washed away.
His share €50k 1/2 the original cost.

Do I understand that correctly?
 
Case 2
As above, Mr and Mrs own a portfolio worth €300k which cost them €100k - so unrealised gains of €200k.
Mr is diagnosed with a terminal illness and given 3 months to live.

All the shares should be immediately transferred into his sole name.
He dies.
The capital gains disappear.
His wife's acquisition cost for CGT is €300k

Brendan
 
Brendan Burgess said:
Thanks Gordon

Case 1
So Mr and Mrs are 50 and are healthy and have €100k to invest.

At this stage, it does not matter, for tax planning purposes, whether the shares are owned jointly or individually - assuming both have other income which uses up the 20% tax band.

So they buy them jointly for administrative reasons.
The shares increase in value to €300k and Mrs dies suddenly.
Now the cost of Mr's portfolio for CGT purposes is as follows
His wife's share at €150k - the Capital Gains have washed away.
His share €50k 1/2 the original cost.

Do I understand that correctly?
Click to expand...
Yes.
 
Brendan Burgess said:
Case 2
As above, Mr and Mrs own a portfolio worth €300k which cost them €100k - so unrealised gains of €200k.
Mr is diagnosed with a terminal illness and given 3 months to live.

All the shares should be immediately transferred into his sole name.
He dies.
The capital gains disappear.
His wife's acquisition cost for CGT is €300k

Brendan
Click to expand...
Yes.
 
Thanks Gordon

I feel a Key Post coming on...

"Investment and inheritance planning for married couples"

I am surprised that I can't find anything online about it.

This Irish Life guide looks interesting.

https://my.bline.ie/media/367/download
 
Brendan Burgess said:
Case 2
As above, Mr and Mrs own a portfolio worth €300k which cost them €100k - so unrealised gains of €200k.
Mr is diagnosed with a terminal illness and given 3 months to live.

All the shares should be immediately transferred into his sole name.
He dies.
The capital gains disappear.
His wife's acquisition cost for CGT is €300k

Brendan
Click to expand...
Sounds like artificial tax avoidance.
 
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