A key to any financial plan is the preparation of a comprehensive estate plan to minimise the cost of transferring the family’s wealth to the next generation.
Estate Planning can be defined as; the orderly and tax efficient transfer of assets/wealth between individuals, and most commonly to the next generation.
Estate planning covers both gifts and inheritances. Trusts are equally relevant in both circumstances, as one of the main tools to facilitate estate planning arrangements.
The core elements of estate planning are legal effectiveness, tax efficiency and practicality.
For many individuals, estate planning can be very straightforward.
In other cases, complexities can arise, including divorce, second marriages, non-marital relationships and children, difficult relationships with children, concerns about in-laws, children in marital difficulties, children with significant debt, children with special needs, complex asset structures, assets in foreign jurisdictions and the impact of cohabitants legislation.
In Ireland, Capital acquisitions tax is payable by a beneficiary on the receipt of a gift or inheritance in excess of their available tax-free threshold.
Since 25 December 2016 – you are exempt from inheritance Tax (CAT) on a house you inherit if all the following apply:
Business relief is a substantial relief in respect of the gift or inheritance of business property.
The legislation is complex, but the relief is designed to prevent the forced sale or break up of trading entities to pay significant capital acquisitions tax liabilities on death or lifetime transfer.
Where available, business relief reduces the tax payable from a rate of 33% to an effective rate of 3.3%.
Agricultural relief is a relief on gifts or inheritances of agricultural property which was introduced to prevent the break-up of farms when passing to the next generation.
The relief reduces the effective rate of inheritance tax from 33% to 3.3%. The conditions for the relief have been significantly tightened up in the Finance Act 2014.
The list of potential issues and solutions is long, and many solutions are quite complex. You should conduct a methodical financial-planning process that includes these steps:
Each step is carefully constructed to uncover and then address the specific challenges that you face.