PLAN THAT INHERITANCE!
CHANGES in taxation often go under the radar and the impact goes unnoticed. In this article we wish to highlight the financial considerations when transferring assets, either by Gift or Inheritance.
Most people will be aware that there is a tax free threshold, whereby the amount transferred will not be subject to gift tax or inheritance tax. This threshold depends on the relationship between the person making the gift/inheritance (the Disponer) and the person receiving it (the Beneficiary). This threshold is subject to change and has been reduced since its peak in 2009. In addition the Tax rate that applies to any excess over the threshold has increased, see chart below: There are many terms and conditions attaching that are beyond the scope of this article, advance planning for these events is essential.
It is possible to start a regular savings plan, known as a Section 73 plan, and use the proceeds to pay gift tax. If this is done correctly, then the savings do not form part of the gift for tax purposes. This is best illustrated by an example, assume the tax free threshold has already been used up and parents want to transfer assets to the value of €399,000 to a child:
In this example, using the Section 73 Policy can reduce the tax
payable on a gift of €399,000 by €32,670.