Financial Planning

Estate Planning

Capital Acquisitions Tax

Capital Acquisitions Tax also known as Inheritance Tax or Gift Tax is a tax which can arise where a beneficiary receives an inheritance or gift. The beneficiary is responsible for paying the tax. The rate of Capital Acquisitions Tax, both for gifts and inheritances, has increased from 20% in 2008 to 33% in 2013. Tax-free thresholds have been dramatically reduced. For example, the group 1 threshold from parents to children reduced from €521,208 in 2008 to €225,000 in 2013.

Section 72 Life Assurance Policy

With correct planning and through use of life policies effected under Section 72, the tax payable on an inheritance can be reduced or eliminated. If the policy is expressly effected under Section 72 Capital Acquisitions Tax Consolidation Act 2003 (“Section 72”), then the proceeds are exempt from inheritance tax in so far as the proceeds are used to pay inheritance tax arising on the insured person’s death. Any part of the proceeds not so used will however be liable to inheritance tax. Your Solicitor or Legal representative should always be consulted in relation to you making a will, Testate & Intestacy issues, the Succession Acts and Probate and also to work closely with your Financial or Tax Advisor when putting the different section policies in place to pay any outstanding liabilities.

A Guide to Capital Acquisitions Tax

If you are a surviving spouse OR surviving civil partners taking an inheritance from your deceased spouse or civil partner, the inheritance is completely exempt and, no matter how valuable, will not be liable to Inheritance Tax. In the case of other beneficiaries, whether or not Inheritance Tax may be payable on your inheritance depends on whether: the total value of all gifts and inheritances, received by you – the beneficiary, from the deceased and from anybody else to whom the same group threshold applies, in the period from 5th December 1991 up to (and including) the date of the inheritance exceeds a tax-free element called the “tax-free threshold amount”. The following table outlines the group thresholds for gift and inheritance tax:

 Group Relationship to Disponer Group Threshold (since Budget 2016)
 A Son/Daughter €310,000
 B Parent*/Brother/Sister/ Niece/Nephew/Grandchild €32,500
 C Relationship other than Group A or B €16,250

The following rates of Inheritance Tax apply:

Up to the tax free threshold amount Nil
Remainder 33%

 

 

The first €3,000 of all gifts received from a benefactor in any calendar year are exempt. It’s important to note that since Capital Acquisition Tax in the form of inheritance or gift are subject to aggregation – a rolling up of benefits from various sources, the relevant thresholds can be affected.

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