The Orca Financial Guide to understanding
Here in Ireland, the whole area of inheritance tax can be baffling. So it is important to get advice from someone who fully understands how it works. At Orca Financial we will take you through all your options, and help you make plans for your estate that suit your needs and maximise the tax efficiencies for those you leave it to.
Who needs inheritance tax planning?
- Parents who wish to fund their children's tax bill in the event of their death.
- Adult children who will have an inheritance tax bill on the death of their parents.
- Business owners who wish to ensure the survival of their business when they pass it on to the next generation.
- Farm owners who wish to protect the value of their land and agricultural assets when they are passed on to the next generation.
Why is inheritance tax planning necessary?
Capital Acquisitions Tax (CAT) is a heavy tax that is levied on those who receive gifts and inheritances. Since 2013, the rate is 33%. CAT comprises two separate taxes – a Gift Tax payable on lifetime gifts and an Inheritance Tax payable on inheritances received on death. While it is the person receiving the gift or inheritance who is liable for the tax, the person giving the gift or leaving the inheritance can take actions that lessen the tax on the recipient.
Are there any exemptions to CAT?
Certain reliefs and exemptions apply to certain types of assets. These have been introduced over the years to encourage private enterprise, and to avoid the forced sale of a family farm, family business or the family home. The main reliefs are:
Agricultural Relief - the value of farmland, buildings and stock can be reduced by 90% where the beneficiary is a qualifying farmer and holds the property for a minimum of 6 years.
Business Relief – provides a similar reduction of 90% in the value of certain businesses or private companies, where both the business and the beneficiary meet the qualifying conditions.
Family Home - exemption from Gift and Inheritance Tax is available on the value of certain “dwellings” with up to an acre of land where the beneficiary meets a number of conditions.
Consider Life Long Insurance
As well as providing life insurance for the duration of your whole life, these policies can also provide tax efficient inheritance planning cover for your family. You have peace of mind of knowing that your family won’t have to struggle financially when you die, and that you’ve minimised the impact of CAT on their inheritance.