Capital Acquisitions Tax (Inheritance Tax) Provision

Capital Aquistions tax (CAT) is a tax that one is charged if in receipt of a gift or inheritance.

The amount of tax that you pay depends on the relationship you have to the person who is gifting the assets. The thresholds that one can inherit/receive have been reduced considerably over the last few years and the tax rate being charged has increased. Practically all assets, gifted or inherited ( i.e. cash, land, Investments etc) will be liable to the tax. This has, in a lot of cases, left beneficiaries with the burden of having to sell assets like their old family home in order to pay the tax bill on the death of a loved one.

The thresholds of the groups who are in receipt of a gift or inheritance are:

Group 1

 

€310,000

Child or Civil Partner of disponer. Or a minor child of a deceased child of the disponer or of the civil partner of the disponer, or a minor child of the civil partner of deceased child of the disponer, or the civil partner of the disponer.

Group 2

€32,500

Where the person receiving the property is a lineal ancestor, descendant, a brother/sister. Or child of a brother/sister or the child of a civil partner of a brother or sister of the disponer.

Group 3

€16,250

All other cases.

The current tax rate is 33%.

What can be done:

We would advise that you( the person that has the assets) sit down with an advisor to evaluate the most efficient way that you can pass your assets on to your estate while diminishing the tax burden on them. In certain circumstances there are reliefs like Agricuture Relief and Business Relief that can lessen the burden of the inheritance/gift but certain rules apply to these.

You can also take out a Section 72 life policy that can be used to pay the tax bill for whoever the policy is issued in trust for. This specific life policy is approved by revenue in that it will not become part of the estate but be used to pay the CAT bill. If a person has a normal life policy that is not set up in this fashion then that would too become part of the estate and be subject the tax. At Donoghue Financial we realise that in these circumstances “Good advice can cost you nothing but can save you thousands”.

Talk to us today if you feel you need advice on this important topic.

Contact Independent Financial Planning