I am a widower who has a child on Disability Allowance. My late wife and I bought a house so our child with a disability could live independently and not be a burden on his siblings. As a result of my having a serious health condition, I had to nominate my eldest son as trustee for the property so that he could hold the house in trust and care for his brother with a disability.
In my will, I plan to terminate the trustee arrangement with my eldest son and am leaving the property to my disabled son, who has been residing at the property for the last 3½ years. I also plan to leave him the sum of €50,000 as I understand that this is the maximum limit of the savings that he may hold and still be entitled to retain his Disability Allowance.
Am I going about things the right way to make sure he will be provided for?
Inheritance tax, referred to as Capital Acquisitions Tax (Cat), is charged on gifts and inheritances received. The tax is charged at a rate of 33 per cent on the value of the inheritance above certain tax-free thresholds.
RM Block
Children can inherit up to €400,000 tax-free from a parent under the current Group A threshold. This is a lifetime threshold and so prior gifts are taken into account. Gifts/inheritances above this amount are taxable.
We assume from your email that this house is a separate dwelling from the home in which you live. There is a relief from inheritance tax, Dwelling House Relief, where a person inherits a house which they lived in with the disponer for at least three years before the inheritance. There are other conditions also, such as your son must not own or have an interest in another residential property at the time of inheritance and must continue to live in the property for six years afterwards. Therefore, the scope for the relief will depend on whether the property referred to is a separate house from the house in which you live.
Depending on the value of the property and the future tax that could arise, it may be worth considering any potential options to mitigate the tax, such as leaving your son a life interest in the property or potentially whether there is any benefit to having a discretionary trust in place.
It is unclear what existing trust arrangements are in place that will terminate on your death. The tax rules regarding trusts are complex and you should ensure you have sought appropriate tax advice. We do not specifically advise on social welfare criteria, but from a broad review your understanding looks correct.
Suzanne O’Neill is a tax partner at RSM Ireland
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