Passing On Wealth
Ever since the government spoke earlier in the year, saying that income tax rates will not rise. There has been speculation as to where they are going to raise the extra cash for December’s budget. The obvious move is that they will hit tax relief. One tax relief that has been hit already is Capital Acquisition tax. This is the tax that is charged when an asset is passed from one person to another.
Inheritance tax is a form of Capital Acquisitions Tax (CAT), which is charged at 25%. Gift tax, which applies to any gift of money or assets made while the donor is still alive, is also a form of CAT.
Who Pays Inheritance Tax?
First of all, spouses and civil partners need not worry about inheritance tax, as husbands, wives and civil partners can inherit from each other without having to pay tax. All other beneficiaries may have to pay tax, depending on their relationship with the deceased and the value of the inheritance. If you have children, they can currently receive up to €332,084 from you in gifts and inheritances without having to pay CAT.
You can give other close relatives, such as your siblings or nephews and nieces, up to €33,208 tax free. Anyone else you have leave money to including your cohabiting partner will have to pay CAT if their inheritance is more than €16,604. ( Thresholds may change annually in line with the Consumer Price Index).
As the tax reliefs are quiet generous, most families won’t need to worry about inheritance tax. For wealthier people, diligent planning can avoid a situation where beneficiaries have to sell inheritances to pay the tax due.
In table below I have included the 2009 rates. It will show you how much the rates have changed in two years. The tax has also increased by 22% to 25%.
The message is that if you are going to transfer assets now would be a good time. The value of the asset is low and the threshold most certainly will be reduced in December.
| Capital Acquisitions Tax 2011 |
Comparatives |
Capital Acquisitions Tax2009 |
| Threshold | Relationship | Threshold |
| €332,084 | Child, or, minor child of deceased child. | €542,000 |
| €33,208 | Brother, sister, child of a brother or sister, lineal ancestor or descendant. | €54,254 |
| €16,604 | other | €27,127 |
| Tax rate | 25% | 22% |
| All benefits received since 5/12/1991 taken into a/c for threshold. | ||
| Annual Gift Exemption €3,000 | ||
Post by Sean Lynch of QiFA
Tags: capital acquisitions tax, cat, december budget, gift tax, inheritance tax, QIFA, Sean Lynch
