Passing down assets upon death is a quagmire for wealthy individuals when really its doesn’t have to be.
Whereas passing assets from spouse to spouse is fairly straight forward, passing assets to children or other individuals requires forward thinking and effective financial planning.
For example, if you pass €500,000 value in assets to a child dependent upon death..
There is a €280,000 threshold**, whereby no inheritance tax is payable.
The remaining €220,000 is taxable at 33%
Inheritance Tax Payable is €73,333
** On or after 14/10/2015, €280,000 threshold from parent to child applies.
Section 72 Plan: You can set up a joint life, second death life insurance plan which covers the inheritance tax payable…ie in the example above, a life insurance payment for €73,333 could be used by your child dependent to pay his/her inheritance tax liability and not be forced to quickly sell assets, ie family home.
You can set up a section 73 savings plan whereby the proceeds are exempt from inheritance tax and can be used to pay an inheritance tax liability. The proceeds are only exempt from inheritance tax if the plan is inforce for a minimum of 8 years and premium cannot increase or reduce by more than 50% during this 8 year period.
Another useful loophole to avoid paying gift/inheritance is to make use of the exemption whereby you can gift assets to different individuals during your lifetime to a maximum value of €3,600 per year.