Revenue Note for Guidance

Part 32 Estates of Deceased Persons in Course of Administration and Surcharge on Certain Income of Trustees

CHAPTER 1 Estates of deceased persons in course of administration

Overview

This Chapter is concerned with the liability to income tax of the residuary beneficiaries on their share of the residuary income of a deceased person’s estate.

Residuary income is, in effect, the total income of the estate received by the personal representatives during the period of the administration of the estate, reduced by any income paid to non-residuary beneficiaries and by certain other annual payments and expenses properly chargeable to income.

The treatment of residuary income payable to a residuary beneficiary differs depending on whether he/she has an absolute (section 801) or limited interest (section 800) in the residue. There is also a distinction made between the way the residuary income of a foreign estate is taxed compared with an Irish estate.

The personal representatives of a deceased person are taxable in their representative capacity on the income of the estate during the period of administration. The rate of income tax applicable is the standard rate. Higher rate tax is not chargeable on a personal representative.

Any distribution of income from an estate during or at the end of the administration period is received by the beneficiary concerned as taxed income where the estate is an Irish estate (that is, income which has suffered income tax at source in the hands of the personal representative at the standard rate). In the case of a foreign estate, any distribution is treated in the hands of the beneficiary as income chargeable under Case III of Schedule D.

799 Interpretation (Chapter 1)

Summary

This section is an interpretation section and gives the definition of, and provides for the construction of, certain terms used throughout the Chapter.

Details

Definitions

(1)(a) “administration period” has the meaning set out in section 800(1) (that is, the period beginning with the death of a person and ending on the completion of the administration of the deceased person’s estate).

“charges on residue” are the liabilities that are properly payable out of a deceased person’s estate and include funeral, testamentary and administration expenses, general and demonstrative legacies and the payment of any annuity. Included are any other liabilities of the personal representatives in their capacity as such. Also included in such liabilities is interest payable in respect of these liabilities.

A deceased person’s estate is a “foreign estate” when it is not an Irish estate.

A deceased person’s estate is an “Irish estate” if the income of the estate consists wholly of income which has either borne Irish tax by deduction or in respect of which the personal representatives are assessable to Irish tax. Excluded is an estate, the income of which is exempt from Irish income tax on the basis that the personal representatives are not resident or not ordinarily resident in the State.

“personal representative” means the executor or administrator for the time being of a deceased person and includes a person who takes possession of or intermeddles with the property of the deceased. It also includes a person who, under the law of another country, has similar functions in that country, in relation to the deceased, as those of a personal representative in this State.

“specific disposition” is a specific devise (of real property) or bequest (of personal property) made by the testator (for example, a specific item of property is left to a person in a will). It includes a similar type of bequest or devise under the law of a foreign country.

Aggregate income of a deceased person’s estate

(1)(b)(i) The aggregate income of a deceased person’s estate for any year of assessment means the total income from all sources accruing to the personal representatives for that year and which consists of —

income chargeable to Irish income tax, and
income which would have been chargeable to Irish income tax had it arisen in the State to a person resident and ordinarily resident in the State.

Any deductions which would have been allowable had the income been chargeable to Irish tax may be deducted.

Sums paid

(1)(b)(ii) to (iv) References to sums paid include references to a transfer or appropriation of assets by a personal representative to himself or herself or a set off or release of debts.

References to sums payable include references to assets which the personal representative is obliged to transfer or has a right to appropriate to himself or herself on the completion of the administration of the estate. The reference also includes debts which the personal representative must set off or release.

References to “amount” in relation to such assets or debts are references to the value of those assets at the date of transfer or appropriation or at the completion of the administration or to the amount of the debts.

Absolute interest in residue

(2)(a) A beneficiary has an absolute interest in the residue or in part of the residue of a deceased person’s estate, if he/she is entitled to the payment of the capital of the residue or of that part of the residue.

Limited interest in residue

(2)(b) A beneficiary has a limited interest in the residue of a deceased person’s estate or in part of the residue if he/she is entitled to be paid the income of the residue or of that part of the residue for a set period (for example, for life or other limited period).

Real estate

(2)(c) Real estate, which is included in a residuary bequest by the will of the testator, is deemed to be part of the residue of the estate and not the subject of a specific disposition.

More than one residuary interest

(3) Where there are several dispositions in relation to the residue of an estate, the provisions of this Chapter are adapted so as to apply to each such part of the residuary estate.

Relevant Date: Finance Act 2021