FEATURES - A Guide To Wealth Inheritance Tax In Ireland 2010

Saturday, 14 August 2010 09:09

Written by Katrina Doyle

Following the recent mini budget the Irish government revealed changes to the rate of Inheritance tax which has increased from 22% to 25% on all inheritances/gifts received above the allowable threshold (the amount a person can inherit without paying tax).

Thresholds themselves have decreased considerably. The net effect of this is that you will be able to inherit less without paying tax on your inheritance and, will pay a higher rate of tax on the amount over and above your applicable threshold. A Section 72 policy can minimise the inheritance tax liabilities your family may inherit.

Inheritance Tax - What is it ?
It is a tax that is paid when you receive an inheritance as a result of death.

Who pays the tax ?
The Beneficiary (the person who receives the inheritance)

What is taxable ?
Practically all assets - cash, land, investments, etc

How much can you receive ?
This depends on the relationship between the donor and the recipient and whether or not any previous gifts / inheritances were received. There are three tax free thresholds, which apply for Inheritance tax purposes:

Group 1, €434,000 - where a recipient is a child, or a minor grandchild of the donor, (where the parent is dead). In some cases this threshold can also apply to a parent, niece or nephew who have worked in a family business for a period of time.
Group 2, €43,400 - where the recipient is a brother, sister, niece, nephew or linear descendant of the benefactor or where the gift is made by the child to the parent.
Group 3, €21,700 - in all other cases. This is known as the stranger threshold. Thresholds are normally linked with inflation but were in fact reduced following the mini budget.

Rates of Inheritance Tax
Up to threshold amount at zero. The balance is taxed at 25%.

S72 Life Policies
Life assurance policies taken out to pay Inheritance tax due on your death (previously called Section 60 policies but now called S72 due to changes in legislation) are also exempt from inheritance tax, provided that the proceeds are used to pay the tax due> if the policy provides more money than is needed to pay the inheritance tax due, the excess will be taxable.

When is the tax payable?
The Inheritance tax must normally be paid, in one lump some, within 4 months of the date the inheritance is received by the beneficiary and within 1 year of the date of death.