My father died two years ago leaving property assets in a discretionary family trust set up during his lifetime. At what stage does the trust become liable for its tax (6 per cent of the trust’s value in year one); at the date of demise or at the date of transfer of assets into the trust? I cannot get a clear answer to this question.
The date is dependent on the circumstances of the potential beneficiaries (referred to as the objects of the trust). The initial once-off 6 per cent charge to a discretionary trust arises by deeming the trustees to have taken an inheritance of the trust property at the latest of the three following dates: (a) the date on which the property becomes subject to the discretionary trust; (b) the date of the disponer’s death; or (c) where there are principal objects of the trust, the date on which there ceases to be a principal object of the trust under the age of 21.
The tax is payable within four months of the valuation date of the inheritance deemed to be taken by the trustees (assuming there is no principal objection under the age of 21).
It is worth noting that where the entire trust property is appointed out of the trust to an object of the trust within five years of the date of the 6 per cent charge arising, the 6 per cent charge is reduced to 3 per cent. An annual 1 per cent charge also applies to discretionary trusts, and the valuation date for the 1 per cent annual charge is fixed at December 31st each year.
Are owners in my estate’s management company using funds to ‘feather their own nest’?
The property management company has put a lock on the lift in my building. What can I do?
Why are we getting condensation on our new triple-glazed windows?
We haven’t bought a house in 35 years. How should we go about downsizing?
Suzanne O’Neill is a tax partner at RSM Ireland
Do you have a query? Email propertyquestions@irishtimes.com
This column is a readers’ service. The content of the Property Clinic is provided for general information only. It is not intended as advice on which readers should rely. Professional or specialist advice should be obtained before persons take or refrain from any action on the basis of the content. The Irish Times and it contributors will not be liable for any loss or damage arising from reliance on any content
