How is an inheritance of €750,000 from an ARF taxed for Mary?

When Mary inherits €750,000 from an Approved Retirement Fund (ARF), it is important to understand the tax implications associated with such funds. The tax treatment of an ARF can be quite specific. In this scenario, the correct approach is that the ARF manager deducts income tax at a rate of 30% before paying the funds to Mary.

An ARF is designed to provide a flexible retirement income but is also subject to specific tax regulations when transfer of capital occurs upon the death of the plan holder. In cases where the inheritance is paid out, there is a requirement for income tax to be settled upfront, thus providing a net amount to the beneficiary after tax implications are taken into account.

The structure of these tax regulations aims to ensure compliance and to appropriately allocate the tax burdens associated with retirement funds. Therefore, understanding that the manager handles the tax deduction directly bolsters the idea that immediate tax liability exists, rather than leaving the inheritance entirely to an individual's discretion in managing future withdrawals or potential inheritance tax situations.

The nuances of inheritance tax can complicate considerations, but in this specific case, the direct deduction by the ARF manager is a fundamental element of how such inheritances operate within the framework of tax regulations.