There are many occasions in a person’s lifetime when they should either make or review their Will, such as when you buy a home, or get married, or become a parent, or upon the death of a child who has children or when there is a significant change in the tax environment.
In my article of the same name, I look at the effect of inceasing Inheritance Tax rates and deceasing tax free thresholds. For example, in early 2009, a son or daughter could inherit €542,544 tax free from a parent or €54,254 from an aunt or uncle. In 2013, a child can now only inherit the vastly reduced sum of €225,000 tax free from a parent and €30,150 from an aunt or uncle. The Inheritance Tax rate on the 1st January 2009 was merely 22%, whereas in 2013, it is 33%. When one considers that the Deceased person’s home is fully liable, it is not that difficult to cross the €225,000 threshold to leave the inheriting son or daughter with a sizeable Inheritance Tax bill.
More importantly that just identifying the problem, I also examine some measures that can be taken to lawfully reduce the inheritance tax bill your loved one may face in the future upon your death. This can be assessed in the context of reviewing your Will and is known as “Estate Planning”. Some of the simpler methods would be to distribute the bequests under your Will to as wide a body of Beneficiaries as possible as the tax free amount or Group Threshold is individual to each Beneficiary. Therefore, it might be possible to divide a bequest originally intended for one child to the child’s spouse and children to minimise the effects of Inheritance Tax. A bequest to a sister could perhaps be divided between her and her spouse and children. I also examine some of the other main Tax Planning measure that should be examined in the context of a person reviewing their Will.
Other complicating factors, such as having assets outside of the jurisdiction or perhaps having been born or having spent significant periods of time outside of the country may give rise to potential pitfalls, but on occasion may provide some tax planning opportunities. These need to be teased out when reviewing your Will in the context of Estate Planning. The intent of my article is to show that it would be foolish to believe that Estate Planning is to preserve the “well off”.
Please do not hesistate to contact me if you wish to discuss the contents of this blog or indeed the article in further detail.