Thursday, 15 May 2014 12:38

Inheritance Tax Planning [Capital Acquisitions Tax]

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Thresholds for passing on wealth in Ireland to family members or others have never been lower and it has become important to start planning to help offset or reduce this tax.

We at Cregan Kelly O’Brien Financial Planning are one of the leading advisors on planning for Inheritance tax or Capital Acquisition tax.

The current thresholds are as follows

€225,000 Child,or , minor child of a deceased child

€30,100 Brother , sister , child of a brother or sister , linear ancestor or descendant

€15,075 Other

Tax of 33% payable on balance

Annual Gift Exemption €3000    

For Example

If you calculate your net worth , that is the total value of your estate after mortgages and loans at say €1,000,000 and we assume you have 2 children and you wish to pass on your estate to your 2 children , then their tax liability on your death based on the current value of your estate will be as follows.

2 children can inherit €225,000 each that’s a total of €450,000.

Balance of €550,000 is taxed at 33%

Total Capital Acquisitions Tax liability payable by the 2 children is €181,500

How to offset or reduce this tax

There are 2 simple ways that you can offset or reduce this tax

1/ Annual Gift Exemption

You can gift €3000 per annum to anyone eg child , grandchild or family member or in fact anyone and there is no tax liability in respect of this tax.

So if you have 2 children and both parents are still alive , the 2 parents can gift a total of €6000 per annum to each child , so in this case the parents can gift €12,000 per annum in total and this amount is exempt from inheritance or capital acquisitions tax

2/ Section 72 life assurance policy

The other way to offset or reduce the tax liability is to put in place a section 72 life policy and the proceeds of this policy can be used to offset or reduce the inheritance tax or Capital Acquisition tax liability.

So in the above example where both parents are still alive and they have calculated their net worth or estate at €1,000,000 and as they have 2 children the children will have to pay the inheritance tax at €181,500 based on the current value of the estate

So the 2 parents can put in a Section 72 life assurance for any amount up to €181,500 and on the death of the second parent the proceeds of this policy can be used by the children to offset the inheritance or Capital acquisitions tax due.

This policy is simple to put in place and the proceeds are paid out on the death of the last surviving parent.

Cost of the cover

The cost of this policy are based on the following

1/ The amount of cover the parents require

2. The ages of the parents at the time they take out the policy

3/ Medical history or whether smoker or non smoker

What are the next steps ?

If you would to discuss this in more detail we would suggest that you contact us to set up an initial meeting.

At this initial meeting we will discuss your particular situation and calculate the tax liability that would be payable by your children based on the current value of your estate.

Once we know your tax liability we can discuss the options open to you as to the best way to reduce or offset this tax

Contact us on 01 870 0370 for an initial consultation

Last modified on Monday, 16 February 2015 13:44
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About Cregan Kelly O'Brien


In 2007 Maurice Cregan and Colm Kelly established CK Financial Services to provide independent financial planning and advice to business owners and individuals. Tommy O'Brien, a General Insurance expert, then joined them in 2010, enabling them to meet the full financial needs of their clients. Financial Life & Planning Limited would deliver Financial Services, and O'Brien Cregan Kelly Insurances would deliver Insurance Broking services. Two Business Names were registered Cregan Kelly O'Brien Financial Planning and Cregan Kelly O'Brien Insurances

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