Mattie McGrath (Tipperary South, Independent)
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To ask the Minister for Finance his plans to prevent foster children from being discriminated against in terms of inheritance laws where the foster parent wishes to bequeath their home to the foster child where such a person has been cared for by their foster carers for all of their life (details supplied); and if he will make a statement on the matter. [46902/12]

Michael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that for the purposes of Capital Acquisitions Tax (Gift and Inheritance Tax), the relationship between the person who provides the gift or inheritance (i.e. the disponer) and the person who receives the gift or inheritance (i.e. the beneficiary), determines the maximum tax-free threshold (known as the “Group threshold”) below which gift or inheritance tax does not arise. There are, in all, three separate Group tax-free thresholds based on the relationship of the beneficiary to the disponer.

Group A: €250,000 - applies where the beneficiary is a child (including adopted child, step-child and also foster children who satisfy certain conditions ) or minor child of a deceased child of the disponer. Parents also fall within this threshold where they take an inheritance of an absolute interest from a child.

Group B: €33,500 – applies where the beneficiary is a brother, sister, a nephew, a niece, or lineal ancestor or lineal descendant of the disponer.

Group C: €16,750 - applies in all other cases.

The Group A tax-free threshold of €250,000 applies to a foster child in the following circumstances:

(i) in the case of a gift or inheritance, where the foster child has resided with the disponer foster parent and was under the care of and maintained by that foster parent at that foster parent’s own expense throughout a period or periods totalling at least five years in the first 18 years of life of the foster child; or

(ii)in the case of an inheritance taken on the date of death of the foster parent, where the foster child had, prior to that date, been placed in the foster care of the foster parent under the Child Care (Placement of Children in Foster Care) Regulations 1995 or the Child Care (Placement of Children with Relatives) Regulations 1995.

Accordingly, in a situation where a person has resided with a foster parent for all of their life into young adulthood and, where the person has been cared for and maintained by the foster parent at the foster parent’s own expense for at least five years prior to attaining eighteen years of age, that foster child is entitled to claim the Group A tax-free threshold of €250,000 for Gift and Inheritance Tax purposes in the same manner as a natural child of the foster parent. The foster child is not discriminated against in those circumstances.

Separately, the Capital Acquisitions Tax code completely exempts an inheritance of a dwelling house from inheritance tax in certain circumstances. The main conditions attaching to the exemption are that the beneficiary of the dwelling house must have resided in the dwelling house for a minimum of three years immediately prior to the inheritance and must not have an interest in any other dwelling house. In addition, the beneficiary must continue to occupy that dwelling house as his or her only or main residence for a period of six years from the date of the gift or inheritance.

This exemption ensures that what may be the family home for many people will not be subject of any inheritance tax when it is transferred on a person’s death.

The dwelling-house exemption is available to any beneficiary who meets the conditions for the exemption irrespective of whether or not they are related to the disponer of the inheritance and irrespective of the value of the dwelling house being transferred. Accordingly, this exemption would apply to a foster child if he or she satisfied the conditions governing the exemption.