Succession – Do you know what’s coming?

MANY of us think a lot about our assets, who we might leave them to, who we might transfer them to and what would happen the assets if we died.

Whilst many tend to have an overview of the assets most people do not consider the finer details of the area of succession and often the devil is in the detail. The Q& A piece below raises important issues that should be considered by all business and farm owners;

It is important to note that your succession plan and Will are not mutually exclusive – they should work together to achieve your future wishes.

Having a Will in place means that you control where and to whom your Estate falls in the event of your death. In drafting your Will your succession plan is considered and, sometimes, a lifetime transfer of assets to the next generation. Where there is no Will in place, the laws of Intestacy dictate where and to whom your assets fall and this can be both costly from a tax perspective, and impractical.

33% Capital Acquisitions Tax (“CAT”, also known as Inheritance or Gift Tax) ii) Lifetime Transfer; 33% Capital Gains Tax (“CGT”) 33% CAT 1%/ 2% Stamp Duty i) CGT; Retirement Relief – can reduce CGT to nil where transferor is over 55 years old and has owned and farmed/ used the business assets for at least 10 years ( subject to limits and conditions in certain circumstances).

Entrepreneur Relief – can reduce the CGT rate from 33% to 10% subject to conditions. ii) CAT; Small Gift Exemption (€ 3k/ annum). Tax Free Thresholds ( dependent on relationship to transferor ranging from € 310k to € 16,250).

Agricultural Relief – can reduce the taxable value of the gift or inheritance by 90% often reducing the CAT payable to nil, subject to conditions.

Business Property Relief – again, subject to conditions this relief reduces the taxable value of the inheritance by 90%,

Business Relief may apply in certain cases to a beneficiary receiving a business or a share in a business – it does not apply to the transfer of individual assets. The assets transferred must be “relevant business property” - they must be used in the carrying on of a business ( which does not include leasing, investments, dealing in securities, currencies, stocks, shares, investment land or buildings),

Dwelling House Exemption – exempts CAT on certain inheritances of a dwelling house as well as gifts to dependent relatives – subject to conditions. iii) Stamp Duty; Young Trained Farmers (“YTF”) Exemption – exempts the transfer from Stamp Duty where transferee is a “YTF”, under 35 and spends 50% of time farming – subject to conditions,

Consanguinity Relief – available in limited circumstances until 1st Jan 2018 – reduces the 2% rate to 1% in certain circumstances.

The above reliefs are vitally important in the succession of farms and businesses alike. Careful planning in relation to the following is essential in order to mitigate & manage potential tax bills;