Bartley Murray Cloney Financial Planning

Impartial Financial Broker

Phone: 063 89888 / 087 8246893

Inheritance Tax Planning

Ireland has one of the highest rates of inheritance gift tax in the world.  Changes in inheritance tax rules commenced in 2009 but it is only now that people are starting to realise the impact this is having as property prices and asset values begin to recover.

The tax bill faced by beneficiaries can be substantial, depending on 3 main factors:

  • The relationship between the deceased and the beneficiary (this determines the maximum tax free threshold that applies, i.e. the Group Threshold).
  • The net/taxable value of the inheritance.
  • Any previous gifts or inheritance received.

What many people don’t realise is payment of this tax bill needs to be paid soon after the inheritance, and the onus is on the beneficiary to pay it and complete a full inheritance tax return.

If you do not plan ahead, your family could lose part of their inheritance or be faced with a difficult decision between having to sell part of their inheritance, or borrow the money to pay the tax bill.

If your family is likely to have to pay inheritance tax when you die, it may be a good idea to protect them against this beforehand.

A tax liability for beneficiaries can be avoided in a number of ways:

  1.  By effecting a ‘Section 72 Life Assurance Policy’

This policy funds the Capital Acquisitions Tax (CAT) liability which arises on the benefits inherited from your estate and the proceed of this are exempt from inheritance tax.  This policy is relatively straight-forward to set up.

  1.  By gifting a maximum of €3000 per person annually.

Your beneficiaries can each receive gifts of up to €3000 a year from you without paying tax.  This exemption, which is know as the small gift exemption, is useful if you can afford to drip-feed your inheritance while you are still alive.  An Inheritance Savings Plan allows you to do this in a tax efficient manner, if you stay under the group threshold.

  1.  By gifting the family home to a child.

You could save your children hundreds of thousands of euro in tax by encouraging them to move into any second homes of investment properties you intend to leave to them.  As long as your child has been living in the house for at least three years before they inherit it – and so long as they meet certain other conditions – he or she would not have to pay any inheritance or gift tax on the property they’ve been given.  This exemption, is known as the ‘Dwelling House Exemption’.

To discuss your Inheritance Tax options, please contact Dave at BMC Financial Planning