The biggest tax bill you could have to pay!
Whilst we don’t like doing it, throughout our working lifetime we all pay taxes, whether it be Income Tax, PRSI, USC, car tax, property tax etc, there is always a bill to pay. Generally as individuals we save this money to pay these taxes or it is deducted at source from our salary.
One of the largest tax bills that some families may face in their lifetime and is often not planned for, is Inheritance tax. With the value of assets in general increasing over the last eight years this tax can now be a massive burden on a family, often forcing them to borrow money or sell part of their inheritance to cover this bill.
Inheritance Tax Child inheriting from a parent
The Class A Threshold now, for a child inheriting from a parent is €310,000. Any inheritance received above this amount is liable to Inheritance Tax at a rate of 33%. The following table shows what Inheritance tax a child would have to pay on receipt of an inheritance of various values. As you can see the bill can be very onerous and is often in illiquid assets, such as property or land.
However, the good news is that if as a family you can talk about this, structured plans can be put in place to help alleviate this burden and to keep more money within the family and give less to the taxman. These plans can include, making use of the annual Small Gift Exemption and/or the structuring of an insurance policy in a certain way to pay the inheritance tax bill for the beneficiary.
The key however is to talk, discuss and put a plan of action in place. The earlier you do this in life the better, as at that stage all planning options to reduce the burden will be available to you. It can be difficult to bring up this subject however it is well worth it.Therefore if you are a parent who will be leaving an inheritance OR a child who is likely to receive an inheritance in the future, talk about it now and take the necessary action.
David Peavoy BA, QFA, LIAP is the Owner of Peavoy Financial Planning whose practice is based in Office 5b, Portlaoise Enterprise Centre, Clonminam Business Park, Portlaoise, Co Laois.
David Peavoy T/A Peavoy Financial Planning is regulated by the Central Bank of Ireland
Disclaimer: All data and information provided within this blog is for information purposes only. It should not be taken as specific advice for your situation. Peavoy Financial Planning makes no representations as to the accuracy. completeness, or suitability of any information and will not be liable for any errors, omissions or delays in this information or any losses, injuries or damages arising from its use