“Nothing is certain except death and taxes” is the famous quote from Benjamin Franklin over 200 years ago. Here we are dealing with both at the same time, but we’d like to assure you that it’s not as complicated as you might fear.
The Revenue website has information on tax (including what exemptions or reliefs may be available) as well as the distribution of assets after a bereavement.
They can provide information where there may be immediate implications for your new circumstances as for example spouse/civil partner or dependent relative. These can concern:
- Tax credit
- Reliefs
- Exemptions
Then there may also be tax implications for:
- For the person who dies
- Those who Inherit (benefit) from the estate/assets of the decreased. These mainly concern Capital Acquisitions Tax (CAT), but Capital Gains Tax (CGT) and income tax may also be relevant.
INheritance (with or without a will)
Determining rate of Capital Acquisitions Tax (CAT)
If after your death the beneficiaries of your estate receive sums in excess of the thresholds for CAT purposes then Inheritance Tax will be payable. The table below helps determine the threshold for the relevant beneficiaries circumstances and thus tax due. Also note
- CAT is charged at the current rate of 33% (valid from 6 December 2012)
- Gifts and inheritances up to a set value are over your lifetime (before having to pay CAT)
- The ‘thresholds/Amts’ are cumulative for each ‘group/category’
- The person who gives you the gift or inheritance is called the disposer.
- The person who receives the gift or inheritance is called the beneficiary.
- Gifts become inheritances if the disposer dies within two years of giving the gift.
| Relationship to Individual/Disposer | Additional Consideration | Rule – Category & Amt | Exception Circumstance | Exception – Category & Amt |
| Married or Civil partner | None | |||
| Child/ren | Also Step-child/ren | A – € 335,000 | ||
| Grandchild/ren | Also Step-grandchild/ren | B – € 32,500 | Grandchildren & step-grandchildren (Of deceased child) | A – € 335,000 |
| Parent/s | If taking gift or a limited interest. Also Grandparent | B – € 32,500 | If taking absolute interest of inheritance on death of disposer child | A – € 335,000 |
| Sibling/s | B – € 32,500 | |||
| Nephews & Nieces | Also step nephew / niece | B – € 32,500 | Favourite Niece or Nephew (Subject to strict revenue conditions) | A – € 335,000 |
| Non relatives | All other relatives E.g. cousins | C – € 16,250 |
Gift Tax
A liability of gift tax arises when a person receives a benefit liable to capital acquisitions tax other than on a death. Please see ‘Give gifts while you’re still alive’ below.
Death and Capital Gains Tax (CGT)
A liability to Capital Gains Tax does not arise on death. Instead when you inherit an asset, you are treated as receiving the asset at the market value at the date of death for the purposes of CAT and CGT. CGT is a tax you pay on any capital gain (profit) made when you dispose of an asset. I.e. if you make a profit on the sale of something you own, apart from your principal private residence CGT of 33% is due.
There is an annual exemption for the first €1,270. If you have made losses on other sales, you can offset gains against them, according to certain rules.
6 ways you can pay less inheritance tax
Give gifts while you’re still alive
One way to reduce your inheritance tax bill is to give gifts while you’re still alive. However, it’s important that the gift is given outright, i.e., that you do not benefit from it after gifting or else it will not qualify for exemption. If you’re considering giving any large gifts, it’s important to seek advice from a professional to make sure you’re getting the benefits you expect.
Small Gift Exemption – You may receive a gift up to the value of €3,000 from any person in any calendar year without having to pay Capital Acquisitions Tax (CAT). This means that you may take a gift from several people in the same calendar year and the first €3,000 from each disponer is exempt from CAT.
This small gift exemption applies only to gifts and not to inheritances. Gifts become inheritances if the person dies within 2 years. However, the Small Gift Exemption still applies.
Leave money to charity in your will
Just like gifts to your husband, wife or civil partner, anything you leave to a charity is exempt from inheritance tax.
Favourite Nephew or Niece Relief
You may qualify for Favourite Nephew or Niece relief if you receive a gift or inheritance of business assets. The relief allows the use of the Group A threshold. On or after 9 October 2019 this threshold would be €335,000. Without this the threshold for the Nephew or Niece would be €16,250 and above this threshold the CAT would be 33%.
This is subject to conditions.
Leave everything to your partner
If you’re married or in a civil partnership, you don’t have to pay inheritance tax on anything you leave to them regardless of the size of your estate.
This does not apply to cohabiting couples.
Leave the house to your children (subject to the rules of CAT Part 24 – Dwelling House Exemption)
There is an exemption from CAT on the inheritance of a dwelling house if:
- you do not own or have an interest in another house
- you lived in the house as your only or main home for the three years immediately before the date of the inheritance
- the house was the only or main home of the person who died (Not applicable if you are a dependent relative)
- you do not acquire an interest in any other house from the same disponer between the date of the inheritance and the valuation date
- the house continues to be your only or main home for six years after the date of the inheritance.
This does not apply if you are over 65 at the date of the inheritance or are required by reason of employment or mental/physical infirmity to live elsewhere.
Make a will
Making a will is normally a good way of minimising your tax bill as you may consider more individuals in addition to the other options above.
This can be done by consider the CAT thresholds for the individual/s concerned.
Note we do not cover Section 72 Policies or Section 73 Plans, not because these policies are expensive, rather that if you are at this level of Tax planning USING LIFE ASSURANCE TO FUND GIFT & INHERITANCE TAX then you most likely are/should be receiving specialist tax/financial advice.
Personal representative
- Is the executor where there is a will,
- The administrator where there is no will / no executor appointed in the will / or the executor cannot or will not carry out their duties.
As the personal representative, you or your appointed solicitor must inform the deceased’s Revenue office as soon as possible by telephone or in writing. If a solicitor is administering the estate, then they will inform the beneficiaries of the relevant taxes. It is the responsibility of the personal representatives to settle any outstanding tax issues up to the date of death as well as to make sure tax is paid on any income or capital gains that arise during the period when the estate is being administered.
Tax Payment deadlines
Capital Acquisitions Tax payment deadline for your liability is 31st October. All gifts and inheritances with a valuation date in the 12-month period ending on the previous 31st August will have to be included in the return to be filled by 31st October. Example: Valuation dates: