Are you planning to give a gift of money or other assets to someone other than your spouse or civil partner in the future?

Are you aware that the person receiving the gift may be subject to Capital Acquisitions Tax (CAT)?

 

If you want your beneficiaries to avoid a hefty tax liability, should you decide to pass on your assets during your lifetime, you can set up a Section 73 Savings Policy, recognised by Revenue, to pay this gift tax liability. This allows your assets to be transferred and utilised sooner whilst providing a substantial saving for your beneficiary. In addition, any further growth in value of assets after the transfer falls outside the CAT regime.

 

This Revenue approved savings plan can be set up for anyone who has assets that they want to transfer to their children (or other beneficiaries) during their lifetime. This relief allows people to plan for the payment of gift tax in a tax efficient way, but if you decide not to utilise it for this purpose you still have savings to use however you wish. Furthermore, if a section 73 savings plan is put in place to provide for the payment of gift tax, Revenue will not charge Capital Acquisitions Tax on the plan proceeds if the money is actually used to pay gift tax.

 

CAT Thresholds 2018

Group A

€335,000

Applies where the beneficiary is a

–  child (including adopted child, stepchild and certain foster children) or

–          minor child of a deceased child of the disponer.

–          Parents also fall within this threshold where they take an absolute inheritance from a child (not a gift).

Group B

€32,500

Applies where the beneficiary is a

–          brother, sister,

–          nephew, a niece or

–          lineal ancestor or lineal descendant of the disponer (eg grandchild).

Group C

€16,500

Applies in all other cases.

 

What is the benefit of taking out a Section 73 savings plan?

The benefit of using a section 73 savings plan to fund the payment of gift tax is that, as long as certain conditions are met;

  • the proceeds of the plan when used to pay your beneficiaries gift tax bill, will not increase their gift tax liability
  • It’s a tax efficient way of succession planning
  • Allows you to distribute an asset during your lifetime without hefty tax implications
  • You are under no obligation to use your regular saver policy for the purpose of section 73

 

If you give a beneficiary additional money to pay the gift tax bill from your deposit account, this will be seen by Revenue as an additional gift and will increase the beneficiaries’ tax bill.

 

For more information on section 73 Gift and/or section 72 Inheritance Tax Planning call Cleona or Mary at O’Leary Financial Planning on 091 778677 or email advice@olg.ie

Scroll to Top