By Dave Kavanagh

In Ireland, inheritance tax and gift tax are both under Capital Acquisition Tax. In 2022 in Ireland, there was over €600 million collected in Capital Acquisition Tax. It also includes estates that may have been taxed in previous generations. For example, if someone left an estate worth €1,000,000 to an only daughter, she would (in the current tax year) have a tax bill of just under €200,000. After she pays the bill and puts what’s left in the bank, any interest is taxed (DIRT). Guess what happens when she passes and leaves her estate behind? It’s taxed again! So what has changed? Spouses can leave any amount to each other tax free. After that, the three new thresholds are, a) Children - €400,000, b) Other close relatives - €40,000 and c) All others (including cohabiting partners) - €20,000. Everything received above these is taxed at 33%.
So, is there any way to prevent it? There are two main actions that can either reduce or eradicate such a tax bill. The first is to take the time to plan when making a will. Let’s say a value of €900,000 was being left to 2 adult children. (Not a big estate if you combine a house, savings and a life policy). This would create a tax bill of over €16,000. Instead, if €800,000 of it was left to the 2 children and the balance between a few grandchildren (at least 5), there is no tax bill. The second thing that can be done is for the person leaving the estate to take out a Section 72 plan. This is a type of life policy that is allowed to pay any tax liability without adding to the value of the estate. It becomes particularly important for anybody that does not have children to plan things out, as even other relatives can only receive €40,000 before any balance is taxed. These thresholds are particularly important for anybody in the process of planning or making their will.

Dave Kavanagh QFA has been advising people financially for over 25 years. For quotes or information (with no cost or obligation) he can be contacted by emailing info@financialcompanion.ie or use the contact form on www.financialcompanion.ie or @Davekav_advice on Twitter and Instagram. Combined with his previous role of gym/nutrition adviser, he regularly gives talks and workshops at seminars and events for groups, companies and government departments on financial wellbeing, positivity and motivation. As heard on RTE 2FM , LMFM and TV3.