My wife and I have four children. I am the birth father of two of them; my wife is the birth mother of the other two. <\/p>\n
We have always assumed that, when we married, our respective children became in law our common children as well. In other words that, for inheritance<\/a> purposes, my two stepchildren are the same as my paternity children and that my wife\u2019s two stepchildren are the same as her maternity children. Are we right? Note, we have not adopted each other\u2019s children assuming that was not necessary.<\/p>\n In our wills, we have left all our assets<\/a> to each other, which ever survives. When the second one dies, our wills indicate that our assets should be divided equally between our four children. Will stepchildren be treated differently for tax<\/a> purposes from birth children?<\/p>\n Mr EM<\/p>\n Blended families are no longer exotic outliers in Irish society. These days it is perfectly normal for people to find themselves with partners who have children from previous relationships.<\/p>\n But the law can be slow in Ireland to catch up on social reality so there can be understandable concern about the position of family members when it comes to key life events, including inheritance.<\/p>\n I suspect your question has been triggered by last week\u2019s query<\/a> from a reader who is only now discovering that his wife\u2019s nieces and nephews might qualify for a \u20ac40,000 tax free inheritance from her but only \u20ac20,000 from him \u2013 a problem given she has now died and they had agreed that the surviving spouse would split their estate evenly across both sides of the family.<\/p>\n And, given the way you have constructed your respective wills, you certainly need to be sure that your respective children will not lose out simply by virtue of their status when one or other of you dies.<\/p>\n As you are aware, children are granted the most generous tax relief when it comes to inheriting. They will be granted an exemption from tax on the first \u20ac400,000 that they receive from their parents \u2013 10 times the next category of family relationship.<\/p>\n [\u00a0In a will, your niece or nephew may not be who you think they are when it comes to taxOpens in new window<\/a>\u00a0]<\/p>\n It\u2019s worth bearing in mind that this figure can, and has, changed over time \u2013 generally, but not always, upwards. The relevant threshold on relief will obviously be the figure in place when you die and inheritance becomes an issue.<\/p>\n The news for you is good but not for others \u2013 specifically the many thousands of parents who for one reason or another have not yet made a will. The distinction comes because there are two separate relevant pieces of legislation \u2013 the 2003 Capital Acquisitions Tax Consolidation Act and the 1965 Succession Act.<\/p>\n The first covers the issue of inheritance tax, the second deals with the wider issue of who has the right to inherit in the event of intestacy \u2013 ie where there is no will.<\/p>\n Section 2 of the Capital Acquisitions Tax Consolidation Act deals with definitions under the legislation and it defines a child as including a stepchild, regardless of whether they are formally adopted or not.<\/p>\n For what it is worth, it also includes anyone who might be adopted either in Ireland or abroad. In fact, even foster children can avail of the exemption from inheritance tax on the first \u20ac400,000 they receive, whether that comes from their foster parents or birth parents as long they have been fostered through a formal process or have lived with your foster parent at their expense for at least five years.<\/p>\n The sum is aggregate, so it includes anything received from any parent, step-parent or foster parent, depending on circumstances.<\/p>\n