Inheritance Tax Planning | Jameson Financial

Inheritance Tax Planning

'Estate planing is an important and everlasting gift you can give your family. And setting up a smooth inheritance isn't as hard as you might think' - Suze Oran

Capital Acquisiton Tax which is levied on a taxable inheritance or gift is becoming a real problem. While increases in income tax or VAT rates are usually met with unsparing opposition, very significant increases in inheritance and gift tax rates coupled with equally significant decreases in tax-free thresholds have hardly raised a whimper. Let's face it, people who are lucky enough to receive a gift or inheritance are hardly likely to congregate at Parnell Square and then march to the Dail in opposition to the tax they have to pay. And even if they did, they'd hardly garner much sympathy. Nonetheless this surreptitious tax has become a bountiful source of revenue for a government intent on sailing a tranquil course in an election year. Here are the facts: in 2009 a son or a daughter could inherit €542,544 tax-free and pay tax at a rate of 20% on the balance. Today that threshold has been reduced to €225,000 while the rate of tax on the balance has been increased to 33%.

The good news is that it is possible to insure against this punitive tax. If you effect a Section 72 Life Assurance policy, the proceeds which are exempt from Inheritance Tax, can be used to pay Capital Acquisition Tax (subject to certain conditions - nothing too onerous!). Although premiums can often be higher than mainstream life assurance products as many who effect Section 72 policies are in the 50+ age group, this cost should be evaluated against the potential size of the Inheritance Tax bill. The reality is that many end up borrowing money or selling the inherited property in order to pay this tax.