Inheritance Planning

Capital Acquisitions Tax still a real issue for your clients?

There may be a perception that, given the recent reduction in estate and asset values, the need to plan for Capital Acquisitions Tax has gone away. If you look at some of the underlying facts, however, the truth is very different. Revenue reported that, in 2011, €244million was paid in Capital Acquisitions Tax; in excess of €976 million worth of assets which you are declaring and paying Gift and Inheritance Tax on.

The taxation double whammy?

Tax rate

The rate of of Capital Acquisitions Tax, both for gifts and inheritances, has increased from 20% in 2008 to 33% in 2013.

Tax-free thresholds

Thresholds have been dramatically reduced. For example, the group 1 threshold from parents to children reduced from €521,208 in 2008 to €225,000 in 2013.

For example

Mr and Mrs Kelly are aged 55 and their estate, valued at €3,000,000, is to be divided equally between their three children. Their children’s inheritance tax bill will be €767,250 – i.e. 25% of the estate will be taken in tax.

The Solution?

As you are aware there is a solution to this problem. A properly structured Section 72 Trust will ensure your high net worth clients will have their estate divided in a tax efficient method. No doubt this is an area you will consider when providing advisory services to your clients.
Who does this apply to?

  • Parents who wish to fund for 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.