The Blog

Inheritance Tax Changes in Budget 2023

Nothing. Nada. Diddly. No changes to the thresholds and no changes to the rate of tax payable.

This is something that we are meant to be grateful for from Budget 2023. Despite the continued rising in property values, where the family home will usually be the largest part of an individual’s estate, there has been no increase in the threshold where you can pass assets to your children without them having any CGT liability. So, you can give your children up to €335,000 each in their lifetime before they would have to pay tax at a rate of 33%. Unless the estate also includes a generous portion of liquid or cash assets, the family home will have to be sold to meet with the tax demand. The tax bill is theirs… it belongs to the beneficiaries and it is up to them to come up with the money to settle it.

You do however have options, so if you would like to explore ways of minimising the amount of tax due and also how to make it easier for your beneficiaries to have access to sufficient funds to settle the bill, get in touch.

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Mixed, opposing opinions for Inheritance Tax review.

Interesting article on RTE today –

It seems that whilst the Commission on Taxation & Welfare recommends a dramatic reduction in the already reduced individual threshold at which someone can inherit assets without having to pay inheritance tax, politicians aren’t champing at the bit to implement it.

Under current Capital Acquisition Tax rules (Of which Inheritance tax is one), a child can inherit €335,000 from their parents before they pay tax on the balance at 33%.

It wasn’t that long ago, that a total of €542,544 could be inherited or gifted before paying tax at 22%. Given that the family home is the main and most common target here and with property prices having reached their previous peaks from 2008 / 2009, this would seem like easy pickings for the Revenue, but as Minister of State for Overseas Development and Diaspora Colm Brophy is quoted as saying “picking on people who inherit the family home that their parents have already paid tax on is wrong.” This would suggest that there is a moral or emotional element to some Revenue decisions. The jury is out on that here!

People who work all their lives to put a home over their heads and provide for their family should not be punished for their hard work when they wish, at the time of their choosing or indeed their passing, to provide their children with something to help secure their future

Fine Gael deputies Neale Richmond, Bernard Durkan and Senator Maria Byrne.

Anyway, if you’d like to have a chat about how to prepare for this inevitable inheritance tax to ease the burden on your children, particularly as it may be a moveable feast for the RC, then please get in touch here.

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Changes To Inheritance Tax for Budget 2022

In a nutshell, everything remains the same. Following the release of Budget 2022, the 3 main thresholds remain as they were, as does the rate of tax payable on any amounts inherited in excess of the thresholds. The rate of tax payable stays at 33%.

Full details of Budget 2022 can be found here;

Given the rapidly rising values in many asset classes – property etc., one could be forgiven for hoping that there would be an increase in the tax free thresholds to allow for at least passing your estate on to your children – even if they were brought back to the higher amounts from some years ago, but unfortunately, they have stayed the same. It would seem like an easy target for the Government – Look relatively generous by not reducing the thresholds and not increasing the rate of tax payable, but no doubt given the rise in property values in particular, this could prove to be quite the windfall for the powers that be.

So, has the need for a Section 72 insurance policy become even more important? If this is something that you would like to explore, please feel free to request a quote for your own section 72 policy here – Request a quote.

The rate of tax payable on your inheritance stays at 33%. Is your estate liquid enough to cope with this payment?

Food for thought!

The two main things that you can gain from organising a Section 72 insurance policy are;

  1. The funds will exist for your beneficiaries to be able to settle the tax bill. No assets will need to be sold.
  2. More often than not, it is impossible to ‘lose’ financially on a policy. E.g. More is guaranteed to be paid out than you could possibly pay in premiums. This does depend on what age you are when effecting your policy.

A Section 72 policy is worth exploring, so if you would like to have a chat about the benefits, the cost and the downsides, phone Brian Whelan on 01 668 6136 or contact us here.

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Are the premiums worth it?

A Section 72 insurance policy is basically a guaranteed, whole of life insurance policy, but written with very specific instructions so that the Revenue Commissioners know not to include the proceeds of the policy as part of the life assured’s estate for inheritance tax purposes.

Guaranteed benefit pay out.

A guaranteed whole of life insurance policy is GUARANTEED to pay out the benefit no matter what age the person covered dies at. This means that it can be quite expensive.

Sometimes people ‘win’ with this arrangement, sometimes the insurance company ‘wins’. So, how can you put yourself in the position of winning?

A win is when you get more from the policy than the amount that you have paid in as premiums over the years of holding the policy. Below is a recent example of a quote that we provided for a client, and this one is clearly a win, in that the person would only lose on their Section 72 policy if they die after the age of 125!

Male / Non-smoker / Aged 55 & Female / Non-smoker / Age 53. Covered by a joint life, second death policy for €180k inheritance tax cover = €214.75 per month. This equates to €2,577 per annum, which means it would take them almost 70 years to reach the benefit amount of €180,000. In reality, as the premiums stop at age 100 (or on the second death, whichever happens first), they will pay a maximum of €115,965 in premiums up to age 100 for a guaranteed pay out of €180,000 from their Section 72 policy.

In this instance, and many others, the premiums are worth it.

The biggest issue with Section 72 policies or the issue that causes the most reluctance to start a Section 72 policy, is the commitment of the premiums at a stage of life when new income may be minimal. Bear in mind that in order for the policy to pay out, premiums must be maintained. So, at age 80, you will still need to be able to pay your premium every month.

As with everything in life, a balanced approach is key. Do you need to cover the entire inheritance tax bill? If your estate includes cash, could this not be used to cover part of the inheritance tax bill? As your children will ultimately benefit from the policy, should they pay the premiums, or at least contribute towards their cost?

Contact us to have a chat about how best to structure your Section 72 insurance policy in a balanced and reasonable way, that will ensure you are not over-committing to something that you may not be able to maintain in the long term.

If you have any specific questions, we are always available to help you out.

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What’s the difference?!

Is it life insurance or life assurance?

So, do you have a life insurance or a life assurance policy? Strictly speaking, you could have either. Each one is correct, but they are different things.

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Specific CAT queries.

Who do I contact with a specific CAT query?

The area of inheritances and gifts and the taxes that are applied to them is similar to all Revenue taxes… a minefield of “unless you are a…”. There are however experts you can contact with any CAT query you have.

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