Inheritance Planning - PLEANÁIL OIDHREACHTA"We have nothing that is really our own; we hold everything as a loan.” ― Nicolas Poussin
– pleanáil oidhreachta
Reasons for Succession Planning
Recent changes in Capital Gains and Inheritance taxation law has meant that a significantly greater number of estates will be subject to Inheritance Tax than heretofore and also that inheritance tax bills will be higher than was the case previously.
Inhertance tax and Capital Gains tax is currently at 33% and this is much higher than the previous 20% rate that applied for much of the last ten years.
In addition the lifetime thresholds have changed significantly and are currently:
- €310,000 – Child or minor child of a deceased child
- €32,500 – Brother,sister,child of a brother or sister, lineal ancestor or descendant.
- €16,250 – Other
As can be seen where there is now a potential significant tax liability for many ordinary families where this may not have been the case when the thresholds and rates were higher and lower respectively.
Developing and implementing a proper succession plan is now of critical importance to many families, particularly, where there may be significant business or farming assets. In many instances, very many Irish families do not even have a will in place to indicate how assets should be distributed on death. Putting a comprehensive succession plan in place is essential for every family and business.
Section 60/Section 72 policies
There a number of different variants of these policies, but typically, they are whole of life policies and generally run until death of final surviving spouse.
The sum assured is guaranteed on death and where the proceeds are used to clear the tax liability on death they do not form part of the estate for calculating Inheritance Tax liability.
As there are a number of different type of these policies, getting the one that is most suitable for your needs will depend on a number of factors, not least of which is the creation of a viable succession plan. This could entail the use of any reliefs that are available, including gift exemptions and other reliefs such as farm relief to reduce the potential tax bill on death. Imapartial financial advice and planning is crucial to any succuession plan.