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Inheritance tax planning for you and your family

They say that the two guarantees in life are death and taxes but what many people overlook are the actual tax implications that arise when they eventually die. This is where understanding inheritance tax is critical.

Capital Acquisitions Tax

The current tax laws will allow a child receive a gift or inheritance from a parent of up to €335,000 in their lifetime. Any amount above that is charged Capital Acquisition Tax at 33%.

This tax bill can a significant issue for the recipient, particularly if the asset they are inheriting is illiquid, like a property or business.

This threshold was as high as €540,000 back in 2008 but since then successive governments have been tightening the net while at the same time increasing the tax rate. As a result people are finding themselves in receipt a significant tax bill.

 C.A.T. Example
Value of Asset  € 1,000,000
Less Tax-Free Threshold -€ 335,000
Taxable Balance  € 665,000
Tax Bill for the Receiver € 219,450


More and more of my clients are enquiring about this lately and by far the most effective way to minimise an inheritance tax bill is to use the proceeds of a life assurance policy.

Section 72 Life Assurance

A Section 72 Life Assurance Whole of Life policy can be set up by the person gifting the asset so that on death the life cover is used to reduce or eliminate the tax bill of the person in receipt of the inheritance.

By effecting this type of policy the person in receipt of the asset can avoid a scenario of being forced in to selling the property or business at potentially below market value.

Section 72 policies are usually set up by a husband and wife on a “dual life, second death” basis but can also be written on a single life basis.

The following table shows indicative pricing and the breakeven point for cover of €1,000,000.

Both Aged Annual Premium Breakeven Point
55 €                      15,400 65 Years
65 €                      27,740 36 Years
70 €                      39,460 25 Years

If you need to assess your estate planning needs or would like further information on how to tax efficiently manage your assets contact Coleman Financial Planning today on (01) 5313711.