What is Inheritance Planning

If after death, the beneficiaries of your estate receive sums in excess of the Thresholds for Capital Acquisitions Tax (CAT) purposes, Inheritance Tax will be payable.

The sense of loss of a loved one can have a severe impact on families and while financial planning can’t lessen the loss, it can reduce the tax bills associated with inheritance.

The inheritance value determines the amount of tax owed, and depending on your relationship with the deceased and the amount involved, the tax bill can be substantial.

Some of the Revenue Basics

  • Capital acquisitions tax (CAT) is a tax on gifts and inheritance. An individual can receive gifts and inheritances up to a set value (or threshold) over their lifetime before having to pay CAT.

  • In order to calculate CAT, it is necessary to know which threshold, tax rate and aggregation rules apply to the inheritance and gift.

  • The thresholds allowed are shared between gifts and inheritances. Once CAT is due, it is currently charged at 33%.

  • Gifts become inheritances if the person dies within two years of giving the gift. There are three beneficiary categories which dictate the CAT threshold amounts.

  • If the beneficiary is a child (including adopted child, stepchild, and certain foster children) or minor child of a deceased child of the disponer which is the person providing the gift or Property (Group A) the CAT threshold is €335,000.

  • For a brother, sister, niece, nephew, or lineal ancestor (i.e., grandparent) or lineal descendant (i.e., grandchild) of the disponer (Group B) the CAT threshold is € 32,500, and for all other cases (Group C) it’s €16,250.

Let IPM Draper Financial Brokers give you a helping hand to plan for the future and lessen the financial burden.