Succession PLANNING
Leaving assets to your family/dependents through a Will can often trigger a liability to Capital Acquisitions Tax (CAT).
In recent years, the CAT thresholds between parents and children have decreased dramatically and the tax rate has increased to 33%.
This means that more and more people have been dragged into the inheritance tax net, and are probably unaware of it.
The tax bill suffered by beneficiaries may be quite substantial depending on:
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The relationship between the beneficiary of the estate and the deceased,
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The net value of the inheritances received by each beneficiary and
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Any previous gifts/inheritances received.
Your loved ones, except for your spouse, may be faced with two choices in order to meet any CAT liability on your estate – either dip into their own resources or sell part of their inheritance.
Having to sell part of their inheritance to meet the tax liability may be a very hard choice to face, especially going through the very difficult period following the death of a parent.
Selling the family home is what a lot of people are being forced into doing today.
There is a solution. Two in fact......
Firstly, Revenue provides an annual CAT exemption for gifts of up to €3,000 per annum per person. This means that a couple can transfer up to €6,000 per annum to each of their children during their lifetime, without incurring any CAT liability and without impacting on the eventual inheritance tax threshold.
A Regular Savings Plan can be established under trust for each child to facilitate the transfers.
Secondly, a client can alleviate their loved one’s liability to inheritance tax by effecting a special "Section 72 Life Insurance Policy", which will provide a cash sum to fund the CAT liability arising on the benefits they inherit from the estate.
The proceeds of Section 72 life insurance policies are exempt from tax insofar as they are used to pay the inheritance tax that arises on death.
Please contact us if you require advice on your succession and inheritance tax planning.