They say Death & Taxes are two of life’s sureties, and indeed many great historical figures have used this phrase, including Benjamin Franklin when he wrote the words, “In this world nothing can be said to be certain, except death and taxes”. As an experienced law firm we understand just how important Death and Taxes are and how inextricably linked they are when considering the distribution of your estate according to your Last Will and Testament.
It is also fair to say that whilst we, as a nation, do not like to discuss matters such as death, not many of us would like to pass if we knew we had failed to put measures in place to reduce the tax burden on our Estate and therefore allow our beneficiaries to inherit more.
In this, the last article in our series of four articles looking at the importance of drafting a Will, we will explore several important considerations relating to the taxation of your estate when you pass.
If you would like to read the other three articles in this series you can find them here:
CAPITAL ACQUISITIONS TAX
Capital Acquisitions Tax (CAT) is the tax due when a gift or inheritance of a certain value is made in Ireland. When you die, however, there are a number of important exemptions depending on the family connection to the persons receiving your estate.
Spouse/ Civil Partners - there is currently full Capital Acquisition Tax (CAT) exemption for a spouse/civil partner. Any gift or inheritances taken by a qualifying cohabitant are exempt from Capital Acquisitions Tax if they are made pursuant to a court order made in accordance with an application under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010.
It is worth noting that should you find yourself in a situation whereby your partner has died without a Will and you do not qualify under the Redress Scheme, you will be treated as strangers for the purposes of CAT and your inheritance.
Capital Acquisitions Tax relates to inheritances (on death) or gifts (throughout a lifetime) and is currently chargeable at a rate of 33%. However, there are tax thresholds which allow you to take a certain amount free of tax.
A. A child can currently receive €335,000 tax free from a parent
B. A lineal ancestor or lineal descendant (brother, sister, niece, nephew, aunt, uncle) can receive €32,500 tax free
C. Others can receive €16,250 tax free
*figures correct as at January 2022
It is also important to note that if you receive a number of benefits within the same threshold they will aggregated. For example, you are entitled to receive €335,000 from a parent. If you get €100,000 today this will be accounted for in the future meaning you can only receive another €235,000 tax free.
Children are defined as a natural child (marital and non-marital), adopted child, step-child and in some cases foster children.
There are certain reliefs that can be claimed from Capital Acquisition Tax, subject to various criteria being met. Your solicitor, or accountant, should be in a position to explore the possibility of those tax reliefs being availed of when you are drawing your Will.
Drafting a Will is an extremely important exercise as it will give you some satisfaction that your estate will be distributed as per your instructions once you die. There are, as we have seen over this series of articles, a number of specific roles and responsibilities for the people you appoint to administer certain aspects of your Will along with specific rights for your spouse, civil partner, co-habiting partner and children. It is important to give each of these due consideration.
You should also consider engaging a firm of solicitors such as Poe Kiely Hogan Lanigan Solicitors to make sure everything is completed appropriately and to ensure your final wishes are carried out upon your death. As this article has highlighted, there are a number of important tax implications for inheritances which need to be thought through carefully. As experienced Solicitors in the field of Wills & Succession planning we can help to guide you, however, we also have a number of tax specialists we can engage with when specific issues arise and you require the assistance of a professional tax advisor.
As previously mentioned, this article is the last in our series of articles looking at the importance of drafting a Will. We hope you have found them useful. If you would like to discuss the preparation of a Will, please do not hesitate to get in touch with the Wills & Succession Planning team at Poe Kiely Hogan Lanigan Solicitors, who can help you to navigate your way through the preparation of your Will.
