If my daughter, who is currently without stable employment, inherits my large family home, would she be liable for inheritance tax if she chooses to sell it and buy a smaller property? She has no other real estate assets and will abide by the stipulation to reside in the property for a minimum period of three years. Given the significant costs of maintaining the property after my demise, it would seem impractical for her to continue living in it alone.
If a residential property is sold within six years of its acquisition through an inheritance, it may lose its exemption status. However, if the heir utilises the full sale proceeds to purchase a different property, which then becomes their main or sole residence, the exemption remains intact. If only a portion of the sales proceeds is used to purchase the new home, a proportional amount of the original exemption is recouped.
Notably, any necessary expenses incurred in purchasing the new home, such as stamp duty and legal fees, are considered a valid portion of the reinvestment. On the other hand, costs associated with the sale of the original property which benefited from the exemption are not regarded as contributing towards the authorised reinvestment.
Could my daughter potentially face any inheritance tax liability if she decided to sell my inherited house after I pass away?
Is there a possibility that I can lay claim to the stretch of land located at the rear of my house?
We are contemplating selling our house, but our tenant has proposed a rent surcharge of 40% to retain possession. What options are available to me?
For instance, consider a residence that had a value of €350,000 at the point of inheritance, thus qualifying for dwelling house relief. This property was soon sold for €400,000. The individual then bought a different property worth €320,000, leaving an unused sum of €80,000 from the original sale. Due to this, the exemption is retroactively adjusted. The total sum that may be subjected to inheritance tax is calculated as such: €350,000 x (€80,000/€400,000) = €70,000. The taxable amount must then be evaluated with respect to the lifetime threshold limit of €335,000.
Suzanne O’Neill holds a key position at RSM Ireland as a tax partner.
This write-up is a service to readers, meant to provide knowledge in a broad sense. The information in the Property Clinic column is not intended to serve as professional advice upon which readers should base their actions. Prior to making any decisions, or avoiding certain actions based on this content, seek professional or expert advice.