The Gazette 1981

GAZETTE

JANUARY/FEBRUARY 1981

"In default of any person taking the estate of an intestate, whether under this Part or otherwise, the State shall take the estate as ultimate intestate successor." The Revenue Commissioners have taken the view in at least one case that the disclaimer of a benefit taken on intestacy passes to the State under Section 73. Whether the Revenue will press this view in all cases remains to be seen and may depend upon the circumstances of each case. The opposing argument is that the effect of a Disclaimer is either to bring in the next interests in title or simply, where the other interests are of equal degree with the disclaiming party, to increase the shares of the remaining beneficiaries. Unfortunately, it is impossible to give positive advice as to the effect of Disclaimer in the circumstances outlined above. This doubt could be removed very simply, as has been done in several other countries, by intro- ducing a simple statutory provision to the effect that where a beneficiary disclaims any benefit, the estate of the disponer should be distributed as if the disclaiming bene- ficiary had died immediately before the disponer. It is understood that a revision of the Succession Act 1965 is pending and this clearly is one of the matters that should be incorporated in any such revision. In the meantime and pending any change in the law, the practitioner should be careful to examine the circum- stances and should warn the client of the possible adverse consequences of Disclaimer. Interest and Valuation Date It has been argued by a member that the provisions of Section 41 (2) of the Capital Acquisitions Tax Act 1976 are unfair, inequitable and punitive, having regard to the fact that interest on C.A.T. is chargeable from the Valua- tion Date, which in certain cases can be the date of death itself. It has been suggested that, in normal cases, at least two or three months must elapse before an Inland Revenue Affidavit can be filed and an assessment to C.A.T. obtained. The Valuation Date is defined in Section 21 of the Act. In response to an approach on the subject, the Revenue Commissioners, Capital Taxes Branch, have replied (28 November 1980) making the following points: (i) Section 44 of the Act enables the Revenue Commis sioners to waive interest in certain circumstances; (ii) if it happens that "it will be two or three months before an assessment is actually made . . .", neither the parties nor their solicitors are prejudiced by the delay in the matter of interest, since it is the practicc not to charge interest in respect of any period during which a case is delayed in the Capital Taxes Branch: (iii) the Valuation Date is, broadly speaking, the date on which the successor becomes beneficially entitled in possession, not only to the property but to the income and profits therefrom. As a corollary, it would not be unreasonable that the successor should pay interest due on the tax that is due from that date. O Continued on page 16

Capital Acquisitions Tax Sections 13 and 73 and Disclaimers Interest and Valuation Date It is well settled that any beneficiary may disclaim a benefit accruing to him under a will or upon an intestacy. Most people do not look a gift horse in the mouth and are only too glad to accept such benefits. When, however, the acceptance of these benefits gives rise to a claim to Inheri- tance Tax, one may look to Section 13 of the Capital Acquisitions Tax Act 1976 for a possible way of avoiding or reducing any liability to Inheritance Tax. This Section clearly recognises the principle of Disclaimer with regard both to absolute interests and interests in settled property. Not alone does the Section recognise unconditional Disclaimers, but it also recognises the possibility of a Disclaimer for a consideration. It does, therefore, open considerable possibilities for mitigation of Inheritance Tax in certain cases. Before exploiting the possibilities of this Section, a lawyer should look very carefully at the possible effects of such a Disclaimer. A Disclaimer must not be confused with an Assignment of a benefit; the person disclaiming a benefit cannot select the person who in turn will benefit from his action and the benefit disclaimed will devolve according to the rules of construction relating to testate or intestate succession. In the case of testate succession, the disclaimed legacy or benefit will pass under the provisions of any "gift over" in the will or ultimately into residue; a disclaimed share passing into residue will devolve in accordance with the residuary provisions of the testator's will or, if the will is silent, in accordance with the laws of intestate succession. If the person disclaiming is also a residuary beneficiary or one of the next of kin, then he may be brought back into the picture, despite his intention to disclaim. This brings one to the consideration of the even worse problem which arises if the disclaiming party is himself a member of the class of next of kin taking on an intestacy. Where does the disclaimed share go? To the remaining next of kin, as if the disclaiming party had never existed? Or to the State, under the provisions of Section 73 of the Succession Act 1965? Section 73 reads as follows:

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