Sometimes we receive questions that actually only require a very short answer. Below you will find a selection of them

As far as inheritance tax is concerned, my understanding is that the Group A threshold of €335,000 is an overall threshold between father and mother.

Can you please tell me what the situation would be if a parent dies while the allowance is €335,000 and leaves a child part of their estate whose value exceeds the allowance, but the other parent dies in a year when the allowance is higher, say €400,000, and leaves the rest of the estate to the child when the allowance is higher?

Does the original threshold of €335,000, which applied at the time of the death of the first parent, apply to all inheritances from the mother and father together, regardless of any increases in the threshold between the dates of death of the two parents?

Mr MB

Listening to the political rhetoric, you might think that inheritance tax relief is so insignificant that it’s hardly worth it. But allowances are a valuable relief when it comes to inheritances, especially the most generous allowance, category A, which applies mainly to inheritances (or gifts over €3,000) from a parent to a child.

Rising house prices mean there is increasing pressure on the Government to raise the threshold for the first time in five years when Chancellor Jack Chambers presents his budget on 1 October, so the issue is certainly timely.

The decisive factor here is the threshold that applies at the time of the person’s death.

Let us consider three scenarios.

1: Your father dies when the tax-free allowance is 335,000 euros and you have an inheritance worth 300,000 euros. Since it is below the current tax-free allowance, it is tax-free.

In a few years, when the allowance has risen to 400,000 euros, for the sake of argument, your mother dies and leaves you an inheritance of 80,000 euros. This means you exceed the old allowance but remain below the new allowance, so no taxes are due.

The fact that the amount is above the old threshold does not matter, since that threshold no longer applies.

2. Your father dies when the allowance is €335,000 and leaves you an inheritance worth €370,000. It is above the allowance of €335,000, so you pay capital gains tax on the €35,000 of the inheritance that is above the allowance at the current capital gains tax rate of 33%. This gives you a tax liability of €11,550.

In a few years, when the tax-free allowance is already at 400,000 euros, your mother dies and leaves you an inheritance of 20,000 euros. Together with your father’s previous inheritance, this results in a total inheritance from your parents of 390,000 euros.

Since this is below the current limit of 400,000 euros, you will not pay any taxes on your mother’s inheritance, but you will not get back the taxes you paid on the previous inheritance, as these were calculated based on the limit at the time.

3. If we assume the same scenario as #2, but in this case your mother leaves you €200,000 instead of €20,000, both your parents have now received an inheritance of €570,000. As this puts you over the €400,000 limit, you will pay capital acquisitions tax on €170,000 of the inheritance received from your mother – a tax liability of €56,100.

It does not take into account that you previously paid tax on part of your father’s inheritance, which is now below the new allowance. So you will pay tax of €67,650 on both inheritances, while another person who received identical inheritances, but received both at a time when the allowance was still €400,000, will have a lower tax liability of just €56,100.

Dormitory exemption and homeowner rule

I read your article with interest – especially regarding the home tax exemption.

You say the heir must have lived in the property for at least three years before the homeowner’s death. Are there any rules about where the homeowner lived during that same period?

Mr SH

Like the inheritance tax relief, the home relief is a potentially hugely valuable tax relief for the recipient, so it should come as no surprise that it is quite narrowly defined.

As you say, the beneficiary must have lived in the property for at least three years before the homeowner’s death to be eligible, and cannot have any interests in other properties — even owning an interest in a vacation home would disqualify you. And they must live there for six years after the inheritance — or six years in that home and a home purchased with all the proceeds from the sale of that property.

And the homeowner? Well, unless the recipient is a dependent relative – someone who is unable to live independently – the homeowner must have occupied the property as their only or primary family home until their death. The law is silent on how long that must be. The obvious answer would be that the beneficiary lived there for at least three years, but the beneficiary could have lived there under two or more different family owners, for example.

And there is one important exception to the residency requirement – ​​namely, when the homeowner does not live in the property because he or she is in a hospital or even a nursing home due to “mental or physical infirmity.”

Gifts for children and compliance with the rules

I am aware that you can receive EUR 3,000 from any person in a calendar year without incurring taxes.

With this in mind, I would like to give my young children €3,000 annually for an indefinite period. However, since they are younger than 7, the bank (PTSB) has informed me that their accounts must be in my name. If these children’s accounts are in my name, will the €3,000 annually still not be taxed when the children are older?

Mrs PH

If the PTSB told you that, they didn’t tell you the whole truth. It is certainly true that no child that young can have an account in his or her own name. However, the PTSB does allow you to have the child’s name included on the paperwork of an account opened by an adult.

This would give you (and the tax office) the certainty that the account and the amounts on it were intended for the child and not just to defraud the tax office.

By the way, any adult can open an account for a child at the PTSB in this way, not just parents. It could also be grandparents, friends or even neighbors.

When the child is older, the account can be transferred into his or her name.

Please send your questions to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to [email protected] with a contact telephone number. This column is a reader service and is not intended to replace professional advice