I am a family friend of an elderly man – 80 plus – with some mental health issues. He lives alone.
He was living with his sister in the family home for many years, in fact all his life. On the death of his mother some years ago, the family home was left to himself and his sister.
Six months ago his sister died. She has willed her portion of the house to her brother. There are no other siblings.
He is anxious now that he will have to pay inheritance tax for the half of the house he is receiving from his sister. He is on a non-contributory pension and lives alone.
1) With his mental health issues and the fact that he has lived all his life in the house can he be exempt from inheritance tax?
2) Alternatively, can the tax be deferred until he dies and could it then be paid from his estate after the house is sold.
Ms D.M.
It’s amazing how stressful people find managing such transitions when close family die. Already fragile emotionally because of the loss, they then find themselves juggling all sorts of financial and tax issues with which they are often not remotely familiar.
The good news here is that your friend has nothing to worry about – as long as they own no other property.
His mental health issues have nothing to do with it. But the fact that he has been living in the property for well over the three-year minimum and will likely be living there for the foreseeable future means he is eligible for dwelling house relief.
This is open to someone inheriting a person’s main family home in which they themselves have lived for at least three years before that person dies and will continue to live there for six years after inheriting it. That six years can be covered even if he were to sell the house as long as all the money he got for it was used to invest in a new family home for him.
The other provision is that he should have no other interest – ownership or part-ownership – in any other property. The key word here is “other”. As the only property he owns is half of this same house, he still qualifies.
For what it is worth for other people, prior ownership of property does not exclude you form this relief as long as you no longer have any ownership of any other property.
The other concern he might have is that the inheritance from his sister could put his non-contributory pension at risk, given that his income and assets are subject to a means test.
However, the means test does not take into account the family home. So as long as he is living there, he will not have to worry about any impact on his pension payment.
Not that it is relevant here, but in situations where a person has a tax liability but not the available cash resources to meet it, it is possible to talk to the Revenue about deferring any bill. The outstanding bill will be subject to interest but Revenue has the power to agree a deferral of payment as long as the person with the tax liability proactively approaches them.
Waiting for Revenue to come to you is never a good idea.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com with a contact phone number. This column is a reader service and is not intended to replace professional advice
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