I hope you can advise me on a sensitive matter. My wife sadly passed away five years ago and I believe that her parents have made a will leaving me a large sum of money. They had originally made a will leaving this sum to my wife but when she passed away they changed the will to benefit me instead. She was their only child and kindly treat me as their son. Will I have a very large tax bill when I receive this inheritance?
A person is entitled to receive an inheritance up to a certain value without being liable for inheritance tax. The amount of tax payable depends on the value of the inheritance and the relationship between the parties.
The tax-free amount, or threshold, varies depending on your relationship to the person giving the benefit. It is a For tax purposes the relationships are categorised into three different groups namely Group A, B and C.
Group A applies where the beneficiary i.e. the person receiving the gift or inheritance is a child of the person giving that gift or inheritance (disponer).
Group B applies where the beneficiary is a grandparent, grandchild, great-grandchild,
brother, sister, aunt, uncle, nephew or niece of the disponer.
Group C applies to any relationship not included in Group A or Group B.
The amount that can be received tax free is known as the threshold. The threshold for Group
A (a child) is €400,000. The threshold for Group B (such as a nephew) is €40,000. The threshold for Group C (everyone else) is €20,000.
However, an exception applies in your particular circumstances. Because you will receive an inheritance from a relation of your deceased spouse, you can be assessed with the same group as your spouse would be if they were receiving the benefit from their relation. For example, if you receive an inheritance from your spouse’s parent, the group threshold would be Group C. However, if you receive an inheritance from your spouse’s parent, and your spouse is deceased, then the group threshold that applies to you would be the same as
for a child receiving an inheritance from a parent i.e. Group A meaning you may receive up to €400,000 tax free within this Group A category, including from your wife’s parents. Any sum received in excess of this will be taxed at 33%