Why Make a Will?
A will ensures that the individual’s estate will be divided and distributed according to their wishes and not as the Succession Act 1965 dictates.
For people with young children it provides an opportunity to appoint legal guardians to the children in the event that both parents should die when the children are minors. A will is an essential part of planning for capital acquisitions tax. By making a will an individual can, make maximum use of the thresholds for his/her children, spouse or civil partner’s exemptions from inheritance tax.
There is less delay and dispute where an individual dies and leaves a will than where no will exists. It highlights just how financially prepared your family would be in the event of unexpected death.
Capital Acquisitions Tax (CAT) is also known as Inheritance Tax.
The current rate of inheritance tax in 2020 is 33%.
This tax applies to all property that is located in Ireland and also applies where the property is not located in Ireland but the person giving the benefit or the person receiving it, is resident in Ireland for tax purposes.
Inheritance Tax Thresholds:
Group A threshold is €335,000, increased from €320,000 in Budget 2020.
Group B threshold is €32,500.
Group C threshold is €16,250 and it applies in all other cases.
Section 72 insurance policy can be taken out by the insured person expressly to pay inheritance tax and approved retirement fund tax due by his or her successors are exempt from CAT, provided certain conditions are met. The relief applies to single- life policies or joint-lives policies. The proceeds of a section 72 policy must be taken on or after the death of the insured person and not later than one year after the death.
A person holding a life interest may take out a section 72 policy in his or her sole name for the benefit of another person on the expiry of that life interest and the proceeds of the policy may be used to pay inheritance tax arising on that event.
Agricultural Relief: If you inherit or receive a gift of agricultural property, you may qualify for agricultural relief this relief reduces the taxable value of the property, including land, by 90%. The relief is subject to conditions. If the agricultural property comprised in your gift or inheritance does not qualify for Agricultural Relief, it may qualify for Business Relief.
Business Relief: where the business property is acquired under a gift or inheritance. This relief works by reducing the value of the qualifying asset which pass under a gift or Inheritance by 90%. The qualifying business assets must have been owned by the disponer for at least 5 years in the case of a gift and at least 2 years in the case of an inheritance. Examples of business assets are; land, buildings, machinery or plant owned by the disponer but used by a company controlled by the disponer. This relief will be clawed back if the assets are disposed of within 6 years of receiving the gift/inheritance.
Talk to Farrelly Financial if you have any questions regarding estate planning.