Estate tax planning is the process of organising one’s property so as to minimise the tax liability when one passing away.
Principal of Mulroy and Company Solicitors, Martin Mulroy became an Associate of the Institute of the Taxation in Ireland in 1995 and we can help you draft your Will and structure your assets to make them as tax-efficient as possible when you pass away. It may be possible to reduce or even eliminate the tax liability that your beneficiaries may be liable for when you pass away.
What is Capital Acquisitions Tax and Inheritance Tax?
Where a gift is left to a person under the will of a deceased person, certain taxes may be payable by the beneficiary. This tax is called Capital Acquisitions Tax or Inheritance Tax. The person who receives the inheritance is the person liable for the payment of inheritance tax.
Certain persons and bodies are exempt from Capital Acquisitions Tax or Inheritance tax, in particular:
· The spouse of the person making the Will
· Charities, which are registered with the Revenue Commissioners.
Accordingly, a bequest left to a spouse or to certain charities is payable in full without the deduction of inheritance tax.
For gifts to other persons, certain tax thresholds or tax-free allowances apply. Capital Acquisitions Tax only becomes payable if the amount received by the beneficiary exceeds the relevant tax-free threshold. The threshold, which applies, depends on the relationship of the beneficiary to the deceased person.
In addition, some exemptions and reliefs from Inheritance Tax are available to particular categories of beneficiaries. For example certain dwellinghouses may be taken tax-free and farm property may benefit from a substantial relief from inheritance taxes in particular cases.
The relevant tax free thresholds, reliefs and exemptions change frequently. It is therefore necessary that you consult your solicitor on these matters when making a will or when taking a benefit from a deceased person.
CAT thresholds
You do not have to pay tax on a gift or inheritance if its value is below a particular group threshold. The threshold you use depends on your relationship to the person who gave you the gift or inheritance. You must pay tax on any remaining value above that threshold.
There are three group thresholds that apply from November 2011:
Group A
A son or daughter of the person giving the gift or inheritance (the disponer). Including certain foster children or a minor child of a deceased child of the disponer. Parents also fall within this threshold where they take an absolute inheritance from a child.
Group B
A parent (in respect of a gift or a limited interest), brother, sister, niece, nephew, grandparent, grandchild, lineal ancestor or a lineal descendant of the disponer.
Group C
People with a relationship to the disponer not already covered in Groups A or B.
CAT thresholds for inheritances or gifts
| Group A | Group B | Group C | |
|---|---|---|---|
| On or after 9 October 2019 | €335,000 | €32,500 | €16,250 |
| 10 October 2018 – 08 October 2019 | €320,000 | €32,500 | €16,250 |
| 12 October 2016 – 09 October 2018 | €310,000 | €32,500 | €16,250 |
| 14 October 2015 – 11 October 2016 | €280,000 | €30,150 | €15,075 |
| 06 December 2012 – 13 October 2015 | €225,000 | €30,150 | €15,075 |
| 07 December 2011 – 05 December 2012 | €250,000 | €33,500 | €16,750 |
Next: Historical CAT thresholds
CAT rates
The standard rate of CAT for gifts and inheritances received on or after 6 December 2012 is 33%.
The rates apply from November 1999.
CAT rates for inheritance or gifts
| Date of benefit | Threshold amount | Balance |
|---|---|---|
| On or after 06 December 2012 | Nil | 33% |
| 07 December 2011 – 05 December 2012 | Nil | 30% |
| 08 April 2009 – 06 December 2011 | Nil | 25% |
| 20 November 2008 – 07 April 2009 | Nil | 22% |
| 01 December 1999 – 19 November 2008 | Nil | 20% |
Important dates for CAT
Date of gift or inheritance
The date of a gift is normally the date it is received. The date of an inheritance is usually the date of death of the person leaving the inheritance.
These dates determine the Capital Acquisitions Tax (CAT) rates and the group threshold that apply. The person who gives the gift or inheritance is called the disponer.
Valuation date
The valuation date is the date when the value of the property and assets is established.
The valuation date determines when you need to pay. Where the valuation date is:
- between 1 January and 31 August, the deadline for CAT payment is 31 October in that year.
- between 1 September and 31 December, the deadline for CAT payment is 31 October in the following year.
See Valuation date and the value of benefits for information on how to determine the valuation date.
Mulroy and Company Solicitors Galway will be happy to advise you in respect of all inheritance tax matters. We are well placed to give advice on inheritance and other tax issues.
Please do not hesitate to telephone us at 091 – 586760 or email us to discuss your claim.