What is Inheritance Tax?
Inheritance tax is payable on nearly all assets such as property, shares and pension assets transferred upon death. Inheritance Tax along with Gift Tax and Discretionary Trust Tax is a form of Capital Acquisitions Tax, otherwise known as CAT.
Inheritance Tax Rate
33%…Levied on sums received over the prescribed thresholds after all other exemptions and reliefs have been taken into consideration. Treatment of ARF pensions should be considered separately.
Inheriance Tax Exemption Limits and Relationships
Inheritances and gifts up to certain prescribed limits are exempt from Capital Acquisitions Tax (CAT). The limit of the exemption depends on the relationship between the person giving and the person receiving. These limits are referred to as the “Group Threshold”.
|Spouse *||Fully exempt|
|Group A * – Child, minor child of a deceased child||€335,000|
|Group B *- Grandparent, grandchild, brother, sister, niece, nephew, parent **||€32,500|
|Group C – All other “strangers in blood”||€16,250|
*For the purpose of these relationships, Civil Partners are considered as a spouse and a child of a Civil Partner as a child.
**In certain circumstances where a parent is receiving an inheritance from a son or daughter, the Group A threshold of €335,000 may be applied. In the circumstances described in the exemptions section below such an inheritance may be fully exempt.
The first €1,270 received in a given year is exempted from the charge of CGT
Group Threshold limits and the rate at which CAT is levied has varied over time. For historical CAT rates and thresholds see http://www.revenue.ie/en/tax/cat/thresholds.html
Life Insurance – Section 72
Section 72 Life Insurance is a life insurance policy used to pay an inheritance tax bill. The policies are set up on a whole of life basis and are hence guaranteed to pay on death. The proceeds of the policy are not themselves subject to the charge of CAT so long as they are used to pay an inheritance tax bill.
Section 72 refers to Section 72 of the Capital Acquisitions Tax Consolidation Act 2003 which provides for the use of the proceeds of a life insurance policies to pay inheritance tax liabilities. These policies can be very efficient and affordable especially when set up earlier in life. Often people only consider Section 72 cover later in life when it may be more difficult to obtain. This is due to a Section 72 policy being a life insurance contract and subject to medical underwriting.