INHERITANCE TAX INTRODUCTION
Anyone who owns a property or other assets such as a life assurance policy, savings plan, deposit accounts we recommend you should make a will. A will not only ensures that you can distribute your wealth as you wish, but it also means your family / beneficiaries are spared the expense and distress of a complicated and drawn out administration of your estate as set out by the Succession Act 1965. Dying intestate is when you die without making a will and your property / assets will be distributed according to the 1965 Succession Act. Since there is no official Executor, the personal representative of the deceased, i.e. spouse, relative or friend will have to obtain a grant of Letters of Administration in order to distribute the proceeds of your estate to your beneficiaries.
INHERITANCE
Capital Acquisitions Tax
If after your death the beneficiaries of your estate receive sums in excess of the Thresholds for Capital Acquisitions Tax (CAT) purposes Inheritance Tax will be payable.
Tax-free threshold for Capital Acquisitions Tax (CAT)
There are three tax free thresholds which apply for CAT purpose. These amounts are as follows :
1) €335,000 (since Budget 2019 to date) where the recipient is a child, or minor grandchild of the benefactor, if the parent is dead
2) €32,500 where the recipient is a parent, brother, sister niece, nephew or linear ancestor / descendant of the benefactor
3) €16,250 in all other cases
Capital Acquisitions Tax Rates
For benefits taken on/after December 2012:
Below Threshold: Nil
Balance: 33%
Note : all benefits received since 05/12/1991 will be taking into account for the thresholds stated above.
Exemptions:
Make sure the numbers add up!
Can fund for the payment of this tax through a revenue approved life insurance policy which the proceeds of are tax-free if used to settle an inheritance tax bill.
(15/12/2019 - payment of CGT on disposals made in the period 1st January 2019 to 30th November 2019, 31/01/2020 on disposals made in December 2019).
GIFT TAX
DWELLING HOUSE RELIEF
Based on rules applicable to period prior to 25 December 2016 only, if you inherit or are gifted a house and you qualify for this relief, then you do not have to pay CAT on the value of the inheritance provided that:
1) It is the principal private residence of the recipient
2) The house must be owned by the disponer during the 3 years prior to the gift
3) The recipient had been living in the home for the three years immediately proceeding the transfer
4) The recipient does not have an interest in any other residential property
Note: A parent cannot gift free of CAT the family home they share with their child unless the parent has moved out of the home at least 3 years prior to the gift, while the child remained in the occupation of it as their principal residence.
BUSINESS INHERITANCE TAX RELIEF
Relief from CAT is available where the business property is acquired under a gift or inheritance. This relief works by reducing the value of the qualifying asset which pass under a gift or Inheritance by 90%. The qualifying business assets must have been owned by the disponer for at least 5 years in the case of a gift and at least 2 years in the case of an inheritance. Qualify business assets are as follows;
FARM INHERITANCE TAX RELIEF
Agricultural Property (land, pasture, woodland, crops, trees, farmhouses, buildings, livestock, bloodstock and machinery, or a payment entitlement) which are passed on as part of an inheritance enjoy some additional CAT reliefs.
Instead of the land being assessed for CAT purposes at its full market value, it is assessed at 10% of its value. Again, be aware that this relief will be disallowed if the property is disposed of within 6 years of the inheritance / gift and partly disallowed if disposed of within 6-10 years. Also to qualify the beneficiary must be a ‘farmer’. This means the persons’ total assets after receiving the gift / inheritance must consist of at least 80% agricultural property. The ‘80%’ test does not apply in the case of agricultural property consisting of trees and underwood i.e. in which case you do not have to be a farmer before you receive the gift / inheritance.
PROTECTION FOR CO-HABITING COUPLES
The problem, 1 in 10 adults in Ireland are cohabiting. Most people are aware that inheritances passing between married couples or registered civil partners are exempt from inheritance tax. This exemption only applies for legal spouses and registered civil partners. All other cohabiting couples are treated as strangers for inheritance tax purposes. The 'stranger' tax-free threshold for inheritance tax is, (since Budget 2017 to date) €16,250. Inheritances that are in excess of €16,250 are subject to tax at a rate of 33%.
Whilst every care has been taken to ensure that the information on this page is accurate, Quigley Financial Brokers does not accept responsibility for errors contained on this page. This Guide does not constitute tax or estate planning advice and has not been prepared based on the financial needs or objectives of any particular person, and does not take account of the specific needs or circumstances of any person.
Anyone who owns a property or other assets such as a life assurance policy, savings plan, deposit accounts we recommend you should make a will. A will not only ensures that you can distribute your wealth as you wish, but it also means your family / beneficiaries are spared the expense and distress of a complicated and drawn out administration of your estate as set out by the Succession Act 1965. Dying intestate is when you die without making a will and your property / assets will be distributed according to the 1965 Succession Act. Since there is no official Executor, the personal representative of the deceased, i.e. spouse, relative or friend will have to obtain a grant of Letters of Administration in order to distribute the proceeds of your estate to your beneficiaries.
INHERITANCE
Capital Acquisitions Tax
If after your death the beneficiaries of your estate receive sums in excess of the Thresholds for Capital Acquisitions Tax (CAT) purposes Inheritance Tax will be payable.
Tax-free threshold for Capital Acquisitions Tax (CAT)
There are three tax free thresholds which apply for CAT purpose. These amounts are as follows :
1) €335,000 (since Budget 2019 to date) where the recipient is a child, or minor grandchild of the benefactor, if the parent is dead
2) €32,500 where the recipient is a parent, brother, sister niece, nephew or linear ancestor / descendant of the benefactor
3) €16,250 in all other cases
Capital Acquisitions Tax Rates
For benefits taken on/after December 2012:
Below Threshold: Nil
Balance: 33%
Note : all benefits received since 05/12/1991 will be taking into account for the thresholds stated above.
Exemptions:
- Any inheritance or gifts made between spouses
- The first €3,000 of all gifts received from a benefactor in any calendar year
- Irish Government stock given to a non-Irish domiciled beneficiary, as long as it had been held by the beneficiary for at least 6 years previously
- Any Inheritance received from a deceased child which had been given to the child as a gift by the parent
Make sure the numbers add up!
Can fund for the payment of this tax through a revenue approved life insurance policy which the proceeds of are tax-free if used to settle an inheritance tax bill.
(15/12/2019 - payment of CGT on disposals made in the period 1st January 2019 to 30th November 2019, 31/01/2020 on disposals made in December 2019).
GIFT TAX
- A liability of gift tax arises when a person receives a benefit liable to Capital Acquisitions Tax other than on a death.
DWELLING HOUSE RELIEF
Based on rules applicable to period prior to 25 December 2016 only, if you inherit or are gifted a house and you qualify for this relief, then you do not have to pay CAT on the value of the inheritance provided that:
1) It is the principal private residence of the recipient
2) The house must be owned by the disponer during the 3 years prior to the gift
3) The recipient had been living in the home for the three years immediately proceeding the transfer
4) The recipient does not have an interest in any other residential property
Note: A parent cannot gift free of CAT the family home they share with their child unless the parent has moved out of the home at least 3 years prior to the gift, while the child remained in the occupation of it as their principal residence.
BUSINESS INHERITANCE TAX RELIEF
Relief from CAT is available where the business property is acquired under a gift or inheritance. This relief works by reducing the value of the qualifying asset which pass under a gift or Inheritance by 90%. The qualifying business assets must have been owned by the disponer for at least 5 years in the case of a gift and at least 2 years in the case of an inheritance. Qualify business assets are as follows;
- Unquoted shares or securities of an Irish company
- Land, buildings, machinery or plant owned by the disponer but used by a company controlled by the disponer
- Quoted shares or securities of an Irish company which were owned by the disponer prior to them being quoted
FARM INHERITANCE TAX RELIEF
Agricultural Property (land, pasture, woodland, crops, trees, farmhouses, buildings, livestock, bloodstock and machinery, or a payment entitlement) which are passed on as part of an inheritance enjoy some additional CAT reliefs.
Instead of the land being assessed for CAT purposes at its full market value, it is assessed at 10% of its value. Again, be aware that this relief will be disallowed if the property is disposed of within 6 years of the inheritance / gift and partly disallowed if disposed of within 6-10 years. Also to qualify the beneficiary must be a ‘farmer’. This means the persons’ total assets after receiving the gift / inheritance must consist of at least 80% agricultural property. The ‘80%’ test does not apply in the case of agricultural property consisting of trees and underwood i.e. in which case you do not have to be a farmer before you receive the gift / inheritance.
PROTECTION FOR CO-HABITING COUPLES
The problem, 1 in 10 adults in Ireland are cohabiting. Most people are aware that inheritances passing between married couples or registered civil partners are exempt from inheritance tax. This exemption only applies for legal spouses and registered civil partners. All other cohabiting couples are treated as strangers for inheritance tax purposes. The 'stranger' tax-free threshold for inheritance tax is, (since Budget 2017 to date) €16,250. Inheritances that are in excess of €16,250 are subject to tax at a rate of 33%.
Whilst every care has been taken to ensure that the information on this page is accurate, Quigley Financial Brokers does not accept responsibility for errors contained on this page. This Guide does not constitute tax or estate planning advice and has not been prepared based on the financial needs or objectives of any particular person, and does not take account of the specific needs or circumstances of any person.
