Inheritance Tax

The Estate of a deceased person is liable to Capital Acquisitions Tax [CAT].

Here are the main assets caught in the inheritance tax net:

  • All personal assets, including your house, contents and personal effects
  • Life Insurance policies arranged on an own life basis
  • Any lump sum death benefit payable under a pension scheme in the event of death before retirement

There are some important exemptions:

  • An inheritance taken by a person who is the spouse/civil partner of the disponer at the date of the inheritance is exempt from inheritance tax and is not taken into account in computing tax.
  • Each year, you are allowed to receive tax-free, a gift of up to €3,000 from another person.
  • Agricultural relief of 90% is granted on farmland and buildings included in a gift or inheritance received by a farmer.
  • Business relief of 90% is granted on “relevant business property” included in a gift/inheritance-with a number of qualifications.
  • Your family home may be exempt if the beneficiary has lived there for at least the 3 years before your death, has no other residence, and keeps the family home for at least another 6 years
  • Life Assurance policies taken out to pay the inheritance tax due on your death are also exempt from inheritance tax, provided that the proceeds are used to pay the tax due. Any excess will be taxed. The tax is payable within four months of the date of the inheritance.

Inheritance tax can be offset by taking out a Life Cover plan generally written in trust providing a definite pay-out to cover inheritance tax liabilities on the death of the life/lives assured in accordance with the provisions of Section 784A(4)(c) of the Taxes Consolidation Act 1997.

Adelphi Financial Brokers can arrange a section 784A Life Assurance Policy set up under trust for your beneficiaries. This will allow the proceeds to be paid into the trust rather than to your estate. This allows for the payment of tax due without having to sell any of the inheritance.

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