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  • PLAN TO SUCCEED! – ESTATE AND SUCCESSION PLANNING
22/03/2023
John Lynch
Thursday, 12 June 2014 / Published in Wills, Succession & Estates

PLAN TO SUCCEED! – ESTATE AND SUCCESSION PLANNING

Contested Wills Lynch Solicitors

Tipp FM Legal Slot – 10th June 2014 – Estate and Succession Planning

Tipp FM logo 2014 (00466745)

 

On Tipp FM, Orlagh Wafer, Solicitor, spoke to Seamus on “Tipp Today” about Estate and Succession Planning and the importance of thinking ahead.

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WHAT IS ESTATE AND SUCCESSION PLANNING?

Estate planning is planning the transfer of assets to the next generation in a tax efficient way.

Last week John M. Lynch discussed Wills and the importance of making a PlanWill.  While making a Will is certainly the first step in planning ahead there are other issues to consider depending on your own particular circumstances.  In certain circumstances it might be appropriate to make gifts to the next generation during your lifetime.  For instance, you may wish to transfer your business or farm to one of your children who are working in the business or on the farm.  Or, you may want to give your children a benefit now as they start out in their adult lives to help get them set up.  It is always vital to remember that you take measures and retain enough assets to maintain yourself for your lifetime, such as a nest egg for nursing home care or retaining a right of residence in the family home on the transfer the ownership.

WHAT LEGAL OBLIGATIONS NEED TO BE CONSIDERED?

Rights of Spouses and Civil Partners

Under the law in Ireland, spouses and civil partners have an automatic right to inherit half of their spouses estate if they die leaving no children and one third of the estate if they die leaving children.

If you decide to leave your spouse or civil partner out of your will completely then this right automatically kicks in.

Not only that, but if you decide to give your spouse a gift in the Will which amounts to less of their legal right they can then elect to choose between the gift in the Will or the legal right share they are entitled to.

Rights of Children

As with spouses and civil partners, there are also legal obligations owed toward children.

However, while children have a right to seek to have provision made for them out of the estate of their deceased parent, this is not an automatic right and certain criteria must firstly be met.

Disposal of Assets to avoid legal obligations

It is very important to be aware that if a person decides to gift assets during their lifetime for the sole purpose of avoiding their legal obligations a court if satisfied this was the sole reason for the disposition can nullify any transaction which was made within 3 years of the death of the deceased.

WHAT ARE THE TAXES INVOLVED IN ESTATE PLANNING?

Capital Gains Tax  

CGT is payable on lifetime gifts and is payable on the increase in value of the asset from the date of acquisition of the asset by the donor to the date of disposal.

Stamp Duty

Stamp duty is payable on the transfer of property during the lifetime of the donor it does not apply where property is transferred on the death of the donor. The current stamp duty rates vary depending on whether the property is commercial or residential:

Residential          1% of value of property up to the value of €1 million and 2% on anything above €1 million

 Commercial       2% of the value of the property with an exemption for the first €10,000

Capital Acquisitions Tax

CAT is payable by the person receiving any gift whether by inheritance or lifetime gift and is probably one of the most important issues to consider when planning for the next generation.Current Rate of CAT 33% as of December 2012 on anything inherited above the applicable threshold. The current thresholds are:

Group A (child)                                                                                 €225,000

Group B (parent, sibling, niece / nephew, grandchild)     €30,150

Group C (any other person)                                                        €15,075

One of the most noteworthy implications of the current tax regime is that spouses and civil partners are not liable for CAT.

However, in a society where co-habiting couples are becoming the norm, the tax threshold is a mere €15,075.  This could result in a high tax bill for the surviving person depending on the circumstances.

Planning ahead is vital in these circumstances to avail of reliefs such as family home relief or putting in place an insurance policy or mortgage protection policy to assist with the tax implications.

There are a number of reliefs available for CAT such as family home relief, dwelling house relief, business relief, agricultural relief and even favourite niece and nephew relief.  However, these reliefs may not always be available.

 In 2009, the threshold for a child who received a gift from a parent was in excess of €540,000.  This threshold now stands at €225,000.  Tax is increasing and the reliefs are decreasing.  For this reason, if you have a clear idea of what you wish to do why not act now?


For further advice or if you wish to discuss any other legal area please contact [email protected] or telephone 052-6124344.

The material contained in this blog is provided for general information purposes only and does not amount to legal or other professional advice. While every care has been taken in the preparation of the information, we advise you to seek specific advice from us about any legal decision or course of action.

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