Estate Planning is concerned with the tax implications of passing on assets and wealth to your next of kin. There is no tax on the deceased person and therefore the tax concerned is on the person inheriting the assets. This is commonly referred to as Inheritance Tax and more technically known as Capital Acquisitions Tax (CAT).
There is no CAT between spouses and typical husband and wife estates pass to each other first and then to next of kin.
There are thresholds below which no CAT is payable and the category is dependent on the relationship between the deceased and the beneficiary. These are lifetime allowances so it includes all gifts and inheritances the individual has received during their lives.
CAT Thresholds 2019
Group A: €320,000 The person receiving the gift or inheritance is a child of the person giving it. This includes adopted children, step children and some foster children.
In certain circumstances a parent taking an inheritance from a child qualifies for Group A. Where the parent takes full and complete ownership of the benefit Group A applies.
Group B: €32,500 The person receiving the gift or inheritance has a family relationship with the person giving it. This includes a parent, brother, sister, nephew, niece, grandparent, grandchild, a lineal ancestor or a lineal descendant of the person making the gift.
Group C: €16,250 The person receiving the gift or inheritance has a relationship with the person giving it which is not already covered in Group A or B.
Estate Planning is so important because there are reliefs and exemptions available for passing on wealth to the next generation and we therefore recommend speaking with one of our tax consultants in advance of distributing of assets.
Where a liability is identified it is possible to effect a Section 72 Insurance Policy which is a life policy taken out specifically to discharge Inheritance Tax. Such policies are exempt from inheritance tax insofar as the proceeds are used to pay the inheritance tax that arises on the death of the life assured.
One can effect a policy on one’s own life or spouses/registered civil partners can effect a policy on joint lives so that in the event of both deaths, their loved ones can use the proceeds of the policy to discharge the inheritance tax liability. The difference between a Section 72 policy and a regular policy is that with a Section 72 policy the proceeds are not included in the estate – with a regular policy the proceeds would be included in the estate and be subject to CAT.
Please contact us for a