Passing on your wealth to loved ones can be a rewarding yet complex process, especially when it comes to inheritance tax in Ireland. Without proper planning, your beneficiaries could face significant tax liabilities that may reduce the value of their inheritance. Fortunately, with the right financial strategies, you can pass on your wealth in a tax-efficient manner while ensuring your legacy is protected.
Gifting Assets During Your Lifetime
Gifting assets while you are still alive can help reduce the overall value of your estate, thus lowering potential inheritance tax. Proper timing and structuring of these gifts are crucial to avoid unintended tax consequences.
The Small Gift Exemption
You can gift up to €3,000 per person per year without it counting toward their lifetime tax-free threshold. This is an effective way to gradually transfer wealth tax-free. Doing so using a Bare Trust Savings Plan allows the beneficiary to benefit from investment growth and this growth will fall outside your estate for inheritance tax purposes. These plans allow you to gift money to your beneficiaries while maintaining control over the assets until they reach a certain age.
Key benefits of bare trust savings plans include:
Potential to reduce inheritance tax liability over time.
Flexibility to invest in a variety of funds tailored to your needs.
Control over how and when the funds are accessed by beneficiaries.
Gift Tax Planning using Section 73 Savings Plans
A Section 73 savings plan enables you to set aside funds to cover future gift tax liabilities. If the proceeds are used to pay gift tax, they will be exempt from CAT, making this an efficient way to pass on wealth during your lifetime.
Advantages of Section 73 savings plans:
Tax-efficient savings strategy for inheritance tax planning.
Funds can be used specifically to pay inheritance tax liabilities.
Provides liquidity to beneficiaries when needed most.
Availing of Agricultural and Business Relief
If you are passing on a farm or business, you may be eligible for reliefs that significantly reduce the taxable value of these assets, making it easier for heirs to retain ownership.
Section 72 Life Insurance Policies
A Section 72 policy is a life insurance plan specifically designed to cover inheritance tax liabilities. The proceeds from this policy can be used to pay the tax bill, ensuring that your beneficiaries receive their full inheritance without needing to sell off assets.
Benefits of Section 72 life insurance policies:
Tax-free payout directly covering the inheritance tax liability.
Provides financial certainty and peace of mind.
Helps preserve the value of your estate for your beneficiaries.
Planning for inheritance tax can seem daunting, but with the right approach, you can significantly minimize the financial impact on your loved ones. If you would like to discuss your inheritance tax planning options, feel free to reach out. We can help create a personalized plan to ensure your wealth is passed on efficiently and in line with your wishes.
One Plan Financial 021-4858400
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