The Department of Agriculture has recently published answers to a list of frequently asked questions about the transfer of entitlements under the Basic Payment Scheme 2018.

The full list of the department's FAQs and replies is published at the end of this post.

Included in the FAQs is the department’s interpretation and proposed implementation of Statutory Instrument No. 639 of 2017 which came into force on 21 November 2017 (see our blog post of 22 January 2018, Important Changes to European Union (Basic Payment Scheme Inheritance) Regulations 2017). 

How the department proposes to deal with the inheritance of entitlements following the new statutory instrument will depend on whether the owner of the entitlements died before or after 21 November 2017. 

​We have summarized the position below.

• ​where the will does not specifically mention entitlements, the entitlements will transfer with the land unless there is a legal impediment preventing the transfer;

• where the will does not specifically mention entitlements and lands are transferred to a number of beneficiaries, the entitlements will be transferred to the beneficiaries in proportion to the amount of land they each receive under the will. If they receive land in equal shares then they will receive an equal number of entitlements.

 

• ​In all cases, where the will of the deceased bequeaths the entitlements to a particular person, the entitlements will be transferred to that person unless there is some legal impediment preventing it.

• ​where the will does not specifically mention entitlements, the entitlements will form part of the residue of the estate and the residuary legatees will inherit them.

• where the will does not specifically mention entitlements and there are farming and non-farming beneficiaries, the non-farming beneficiaries can do either of the following:

                  a) waive their rights and allow the farming beneficiary to receive the entitlements, or
                  b) apply for a 700 series herd number, take the entitlements and then transfer them to a third party
 

• Again, in all cases, where the will of the deceased bequeaths the entitlements to a particular person, the entitlements will be transferred to that person unless there is some legal impediment preventing it.

In Irish law, if the surviving co-owner has not contributed to the joint account, the presumption is that a ‘resulting trust’ exists and the survivor holds the funds on trust for the deceased’s estate and not as beneficial owner.
 
This default position can be rebutted in certain circumstances.
 
For example:
 
1. If there is clear evidence that the account was put into joint names with the intention of making a gift to the surviving co-owner, then the surviving co-owner will be entitled to the funds.
 
2. If the surviving co-owner is the wife or child of a deceased (male) co-owner, then the “presumption of advancement” will displace the presumption of a resulting trust and the funds will advance to the wife or child, unless there is evidence that this had not been the intention of the deceased.
 
In summary, if no consideration was paid by the survivor, if there is no evidence of intention to make a gift, and if the surviving co-owner is not the wife or child of the deceased, then the survivor holds the funds on trust for the estate. This means that the funds will be distributed in accordance with the terms of the will of the deceased or, if the deceased has not made a will, in accordance with the laws of intestacy. 

It is quite common in Ireland for a parent - often an elderly or infirm widow or widower - to add the name of their son or daughter to their bank account as a joint owner or co-signatory.
 
Often, this is done “for convenience”, with the intention of enabling the son or daughter to operate the account for the benefit of their parent: to pay, for example, various day-to-day expenses on the parent’s behalf.
 
In such circumstances, the funds remain the property of the parent and, on the death of the parent, form part of the parent’s estate. The surviving joint account holder is said to hold the funds on a “resulting trust” for the estate. In other words, no beneficial ownership passes to the surviving joint account holder at any time.
 
Sometimes, the parent might wish for the child to take a benefit from the account, either at the time the account is put into joint names or, more often, on the parent’s death. There might, in other words, be an intention on the part of the parent to make a gift to the child.
 
A parent might also intend for both situations to apply successively. While they are alive, the parent might want the child to operate the account for the parent’s benefit and convenience but intend, at the same time, that the child should succeed to the ownership of the account after the parent’s death.

If another person’s name is to be added to an account for convenience, then the account mandate signed with the bank should make this explicit. It is always preferable in such circumstances that the new person’s name be applied to the account as a signatory rather than as a joint owner of the account. This removes any doubt as to the intentions of the parties.
 
In all cases, whether the new name is to added with the intention of conferring a benefit or merely for conveience, it is extremely important that the older person be afforded the opportunity to receive independent legal advice.  This will ensure that they fully understand the effect of putting another name on their account and that they are not subject to any undue influence. Their intentions should be made clear to all parties - including the bank - written down, and acted upon.
 
The account mandate should be reviewed and signed by all account holders and copies retained. 

A resulting trust - also called an implied trust - is a trust that arises by operation of law based on the unexpressed but presumed intention of the parties. Such a trust exists when an interest in property has been transferred from one person to another but the beneficial interest returns - or results - to the transferor.
 
As a general principle of law, where the legal ownership of a property is transferred from one person to another and the transferee (the person who receives the property) gives no consideration (or payment) for it, then the transferee is presumed to hold the property on a resulting trust for the transferor.

​The transferee can rebut this presumption by providing evidence of the transferor’s intention to make a gift.
 
Alternatively, and to similar effect, the presumption of advancement might apply. Whether it does or not will depend on the relationship of the people involved.

​The presumption of advancement is based on the idea that when one person stands in a particular relationship to another, particular obligations ensue; and that when, in the context of such a relationship, property is transferred from one to the other, there is a presumption that the transferor intended to benefit the transferee absolutely.
 
In a situation where funds are placed by one person into a joint account with another, the doctrine operates to presume that the parties hold the beneficial interest jointly and, ultimately, for the benefit of the survivor.
 
The presumption of advancement, like the presumption of a resulting trust, can be rebutted by contrary evidence. In other words, if there is evidence that an advancement or gift was not intended, this evidence will override the presumption of advancement and the default position, that of the resulting trust, will apply.

The Minister for Finance had some good news this week for Setanta third party claimants – not to mention the defunct insurance company’s unfortunate policy-holders – when he announced an agreement in principle that the State would ensure that compensation claims would be paid in full. The proposed scheme – once it clears all state aid and competition law obstacles – will also apply to claims against Enterprise Insurance which likewise shut down leaving thousands of policy-holders without cover and claimants unpaid.  

The announcement means that, at long last, there is an end in sight to many years of anxiety suffered by claimants and policy holders, the former worrying that their rightful claims would not be paid in full, the latter facing the prospect of personal ruin in situations where the value of the claim against them exceeded their ability to pay it.

It was often pointed out during the course of the Setanta debacle – and was acknowledged again by the Minister in his announcement –  that the victims of motorists who wilfully or negligently drove without insurance were compensated 100% for their injuries through the MIBI while, in contrast, those involved in an accident with a Setanta motorist – a supposedly insured motorist – faced the possibility that their claim would, at best, be only partially covered. This left the innocent Setanta policy-holder personally liable for the balance of the claim, which in some cases could be enormous.

The liquidation of Setanta was the subject of protracted court proceedings, ultimately decided by the Supreme Court in May 2017. The court held that the Insurance Compensation Fund (ICF) was responsible for the payment of third party claims up to 65% of the claim or €825,000, whichever was the lesser, leaving, in most cases, a shortfall of 35%. While there was some hope that the liquidation of the Maltese-registered insurer would eventually yield up to 22%, it was the policy-holders against whom the claims were made who were immediately on the hook for the deficit.

While the news is positive from the point of view of claimants and defendant policy holders, it is not so good for the average motorist who will be required to pay for an extended period the 2% insurance levy to the ICF, the fund initially set up to cover the costs of the collapse of Quinn Insurance. As a result of the newly-announced Setanta compensation fund, the ICF is due to last an additional eight months or so beyond its initially anticipated span. The fund is expected to expire in 2028 or thereabouts, provided there are no more insurance failures in the meantime.

​Watch this space.

 Application of CGT, chargeable persons and rates 

CGT applies in relation to any life time transfer of property including the transfer of a site

CGT is charged on the person who sells or transfers the property.

A charge is applied even if the person who transfers the property is not receiving any consideration or payment in return for it. In such a case the property is deemed to be disposed of at market value and CGT is charged on that value. 

Tax is payable on the difference between the value of the site at the date it was acquired by the transferor and the value it has on the date of the gift to the transferee, at a rate of 33%. 

However, in the case of a transfer of a site from a parent to a child, a CGT exemption is available.
 
 CGT exemption on the transfer of a site from parent to a child
 
If a person transfers land to their child to build a house which is to be the child’s only or main residence, the transferor will not have to pay CGT on the transfer.  
 
In order to qualify for this exemption, the site must be:

• an area of no more than one acre
• with a value of no more than €500,000

​ In addition, the child is required to build a house on the land and occupy that house as their only or main residence for a period of three years.  
 
Clawback of the relief
 
The exemption will be clawed back in circumstances where the child does not comply with the requirements.
 
So, if the child disposes of the site either

• without having built a house on the site

            or

• having built a house on the land, but without having occupied that house as their only or main residence for the full period of at least three years,

then, in such circumstances, the CGT that the transferor parent would have been liable to pay on the transfer to the child if the exemption had not been availed of becomes payable by the child.
 
This clawback does not apply in a situation where the child disposes of the land to a spouse or civil partner.

The government has just launched another initiative to help people  – who, up to now, had been excluded from the housing market  – purchase their first home.
 
The scheme, called the Rebuilding Ireland Home Loan, is due to commence on 1 February 2018 and is aimed at first time buyers with annual salaries of less than €50,000 for a single applicant or less than €75,000 for joint applicants.
 
The main benefits of the scheme will be, firstly, the relatively cheap lending rates –  starting at 2% over 25 years – and, secondly, the fact that it will offer potential buyers a way around the Central Bank’s income multiple rule which limits mortgage borrowings to 3.5 times the borrower(s)' salary.
 
The scheme will apply to first time buyers of new and second-hand (and self-build) homes.

Applicants will be able to borrow up to 90% of the purchase price up to a maximum purchase price of €320,000 in Dublin, Cork, Galway, Kildare, Louth, Meath and Wicklow, and €250,000 in the rest of the country. The effect of this is that the maximum loan (90% of the purchase price) will be €288,000 in the seven above mentioned counties and €225,000 everywhere else.
 
The loan term will extend over a maximum term of 30 years. 

The scheme offers three different rates, as follows: 

• 2%* fixed for up to 25 years (APR 2.02%*).
• 2.25%* fixed for up to 30 years (APR 2.27%*).
• 2.30%* variable (subject to fluctuation) for up to 30 years (APR 2.32%*).

* These are current rates and are subject to change.

The Minister for Agriculture has, by way of Statutory Instrument No. 639 of 2017, given effect in Irish law to EU Regulation 1307/2013.
                                 
The Statutory Instrument provides:
 
Where a deceased person bequeaths land in a will and –

• At the time of his or her death held an allocation of payment entitlements under Regulation 1307/2013, and
• made no provision for those payment entitlements in his or her will

such payment entitlements (or share thereof) shall transfer with the eligible land unless there is a legal impediment preventing the transfer.
 
The Explanatory Note to the instrument states:
 
This Statutory Instrument provides legal basis to the Department of Agriculture, Food and the Marine for the inheritance of Basic Payment Scheme entitlements where the will of a deceased farmer is silent in relation to these entitlements. The SI provides for the entitlements to transfer with the land in such circumstances.
 
Thus, the position in regard to an inheritance of entitlements is different under the Basic Payment Scheme than it was under the Single Farm Payment Scheme.
 
The position is that entitlements now transfer with the land unless otherwise specified in the will or unless there is some other legal impediment preventing such a transfer.
 
The Statutory Instrument was executed on 21 November 2017 and published in Iris Oifigiúil on 19 January 2018