Irishwills.ie Articles - What’s in store for inheritance in 2012?



 

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What’s in store for inheritance in 2012?

 

Overview
While details are still unclear as to what will actually transpire during 2012 in terms of estate planning, some possibilities are looking increasingly likely! There may be some changes in relation to reliefs on the horizon.  Ireland main taxation applicator in terms of the taxation on inheritance is referred to as inheritance tax or Capital Acquisitions Tax (CAT).

While taxation may not be at the forefront of your thoughts when a loved one dies, it is something that should raise concern if you have received an inheritance. An inheritance can be any asset gifted by the deceased. The type of assets can range from cash, shares, royalties, cars, real estate and jewellery. You will be required to make a tax return on your inheritance within a relatively short time frame.

Capital Acquisitions Tax (CAT)
CAT is a taxation applied to the inheritance of an asset. The 2012 rate currently stands at 30%. A proportion of the inheritance can be transferred to the beneficiary in conjunctions with predetermined reliefs or exemptions without tax being applied. Therfore you only pay tax on the value of the asset less any exemptions or reliefs which have been applied.

CAT includes both inheritance tax and gift tax. Inheritance tax is a form of tax which applies at the rate of 30% (25% in 2011) of the value of a benefit received by a beneficiary on the death of someone. In other words, it is a tax on the property and other assets that people receive from you, when you die. Gift tax is a tax payable by the recipient on gifts received (otherwise than on the death of someone) at the rate of 30%. Both inheritance tax and gift tax are payable by the beneficiary.

 

  2012 2010 (on or after 8 December 2010) and 2011
Group A €250,000 €332,084
Group B €33,208 €33,208
Group C €16,604 €16,604

 


Example of where relief can be applied include:


Group A
This group is directed at parents.

  • The prerequisite for the inheritance is the passing of the entire inheritance to the parents and where the parents retain complete ownership of the inheritance

  • If only a proportion is passed to the parent’s, they are assessed under group B

Group B
This group is directed to beneficiaries who fall under the following blood relationships:

  • Parent (if not subject to relief in Group A)

  • Grandparent

  • Grandchild or Great Grandchild

  • Brother or Sister

  • Niece of Nephew

 

Group C

This group is directed towards beneficiaries who do not fall

under the categories outline in Group A or Group B.

 

CAT Exemptions
Some Capital Acquisition Tax exemption is available. In these cases the transfer of the asset or inheritance is exempt from CAT. These situations include:

  • Any inheritance of transfer of gifts between spouses

  • Payments for damages or compensation

  • Benefits used only for the medical expenses of a person who is permanently incapacitated due to physical or mental illness

  • Benefits taken for charitable purposes or received from a charity

  • Winnings from a lottery, sweepstake, game, or betting

  • Retirement benefits and pension and redundancy payments are not usually liable to Gift Tax.

  • The first €300 of all gifts bequeathed to a  beneficiary during the year

  • In situations where a deceased child had received an inheritance gift within the last 5 years on which CAT was paid and the same gift is now being transferred back be the deceased.

  • Family homes can be exempt in situations where the house is the principal residence of the deceased and the beneficiary. There is however strict guidelines which must be observed in these situations, for example generally the beneficiary must have been living in the residence for 3 years preceding the death of the giver. The deceased/owner must have owned the house themselves for the previous three years. The beneficiary is also required to hold the property for 6 years after transfer, should the beneficiary sell the property within 6 years, CAT then becomes payable.

  • Other reliefs and exemptions are available so it worth consulting a probate solicitor for appropriate advice in relation to your exact situation! Example include, relief for cohabiting couples, government securities etc

 

 

For more detailed information on the topic above and other issues relating to Irish wills, read our Last Will & Testament Kit written by an Irish Solicitor to answer all your questions.



 

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