What assets is a person “competent to dispose of” at death?

(1) Assets of which a deceased person was “competent to dispose” are assets located in the State which the deceased, if aged 18 or over and not incapacitated, could have included in his/her will.

Such assets include the deceased’s share of property held under joint tenancy.

What happens to a person’s assets on death?

(2) A deceased person’s assets are treated as acquired by his/her personal representatives at market value at the date of death.

Such assets are not regarded as disposed of by the deceased.

Can year of death losses be relieved?

(3) Allowable losses incurred by the deceased in the year of death, may, if not capable of being absorbed by gains in that year, be set off against gains accruing in the three years immediately preceding the year of death.

Example

01.06.2010 X, a single person, died. In the tax year 2010, she had an allowable loss of €5,000.

Her gains for the three immediately preceding tax years were:

2007 2,000
2008 4,000
2009 2,000

Her terminal loss may be set against these gains as follows:

set off revised gain
2007 2,000
2008 4,000 (3,000) 1,000
2009 2,000 (2,000) nil
(5,000)

Any CGT already paid for 2008 and 2009 will be repaid, as the 2008 gain is covered by her annual exemption of €1,270.

Where are personal representatives resident?

(4) Personal representatives are regarded, in relation to the deceased’s property, as a single and continuing body of persons having the same residence, ordinary residence and domicile of the deceased at the time of death.

Is a transfer by personal representatives chargeable?

(5) Any gain made by the personal representatives on assets passed to a legatee is not chargeable.

The legatee is treated as having acquired the assets from the date the personal representatives acquired the assets.

The legatee takes the assets he inherits at market value at the date of death. See Bentley v Pike, [1981] STC 360.

A legatee, upon inheriting the residue of his mother’s estate (worth £3,600) arranged with the executor that he would pay the debts of the estate in return for a house worth £6,000. When he later sold the house, he claimed he was entitled to deduct the market value of the house at the date of death, in addition to the sum paid to the executor as an amount paid to defend his title to the property. The court held he was only entitled to deduct the market value of his inheritance at the date of death (the £3,600 residue) plus the costs of acquiring the house, but not the market value of the house at the date of death. This was because he had no legal interest in the property at that time: Passant vJackson, [1986] STC 164.

Is a disposition under a deed of family arrangement chargeable?

(6) A deed of family arrangement, if made within two years of the date of death (or such a longer period as may be agreed with Revenue), is regarded as having been made by the deceased.

Any variations included in such a deed are regarded as having been made by the deceased, and any disposition made by the deed is not a disposal for CGT purposes.

A deed of family arrangement under which a legatee settled her interest in the residue on a trust administered by a Jersey company was held invalid on the basis that it did not relate to “assets of which the deceased was competent to dispose”. At the time of the settlement, the settlor had no right to any assets until the residue was ascertained: Marshallv Kerr, [1991] STC 686.

A deed of variation to rectify an earlier deed is not a variation of the deceased’s dispositions: Russell v IRC, [1988] STC 195. A court order may be obtained to rectify the earlier deed: Lake v Lake and others, [1989] STC 865.

If words have clearly been omitted from a deed of family arrangement, the court may order that the missing words be read into the deed: Schneider v Mills, [1993] STC 430.