Inheritance/Capital Acquisitions Tax Planning

Do you want the Tax Man to take up to 25% of your estate?

This is exactly what will happen unless you start planning now and make arrangements to offset and reduce the potential liability for your children

Inheritance Tax Guide - Ireland

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

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2 simple ways that you can offset or reduce this tax

1/ Annual Gift Exemption of €3000

You can gift €3000 per annum to anyone e.g. a child , grandchild or family member or in fact anyone, so 2 parents can gift a total of €6000 per annum to each child , so if you are a parent with two children you can gift €12,000 per annum in total and this payment is tax free for the recipient. This payment can be made every year and can help reduce the overall inheritance tax liability.

2/ Section 72 life assurance policy

A section 72 life assurance is a life assurance policy specifically introduced to help people offset or reduce their potential inheritance tax liability

How a section 72 life policy works

Say you have estimated the total value of your estate including all your assets at €1,000,000. You have 2 children and you wish to leave your estate to them on your death. They can inherit €225,000 tax free each so that’s a total of €450,000 that they can inherit between them. They are taxed at 33% of the balance of €550,000 so their tax liability would be €181,500.

A section 72 life assurance policy will allow you to effect a life assurance policy for up to €181,500 and on death the proceeds of this policy can be used to clear the inheritance tax liability

If there are 2 spouses the policy is taken out on both lives and paid out on the death of the second spouse, it’s called a joint life second survivor policy.

How much will the policy cost ?

The cost of the policy will depend on the following

1/ Ages of the spouses

2/ The amount of cover required, this will need to be worked out based on the value of your estate and how many children you have and your overall plans for passing on your estate, eg have you made a will

3/ Health of the spouses and whether they are smokers or non smokers

The cost of taking out the policy is borne by the spouses and a section 72 life assurance policy is a very cost efficient and tax efficient of planning for inheritance

Why has inheritance tax become such a big issue for parents ?

There are 3 main reasons for this

1/ Inheritance tax thresholds have reduced to their lowest level and this has can created major issues for parents the thresholds are as follows

A/ €225,000 to a son /daughter

B/ €30,150 to a Parent /Brother/Sister /Nephew /Niece /Grandchild

C/ €15,075 All other cases

2/ The tax liability has increased to 33%[ was 20%] on all inheritances over these threshold amounts

3/ Property values are on the rise again which has started to focus the mind for parents especially those who own a number of properties, this has had the effect of increasing the overall value of their estate and as a result the inheritance tax liability that will have to be paid by the children

You have 2 options open to you

1/ Do nothing and leave your estate to your next of kin and let them pay the tax liability when it becomes. Some assets may need to be sold in order to pay for this tax

2/ Take advice and start planning now to try and reduce and offset this tax

We at Cregan Kelly O’Brien financial planning will help you plan for the process involved

There are four stages in the process

1/ Have you make a will and if so what are the main details, if not how many children do you have and what are your plans for your estate

2/ What is the total value of your estate now , we can help you work this out

3/ Work out the potential tax liability based on your estate value and plans for inheritance

4/ Advice you as to the best options to reduce the potential liability

We at Cregan Kelly O’Brien financial planning are here to help and assist you in planning for your inheritance. There are simple ways to reduce and offset this tax and we will discuss these options in detail with you

Take the next step

To discuss this in more detail 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

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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. The group has since been renamed Cregan Kelly O'Brien.

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