With property values low and tax rates rising, now is the ideal time to finalise your succession strategy.  

Inheritance and gift tax (or CAT) is currently levied at 25%, although this may change if there is upwards pressure on this rate in future budgets.

The main tax free thresholds are:

• Parents to children, €414,799 each;
• Between brothers and sisters, to nieces/nephews, grandchildren etc, €41,481 each;
• Between strangers: €20,740.

All gifts since 1991 in these classes are aggregated together. Don’t forget the exemption regarding transfers between husband and wife; all transfers between spouses are completely tax exempt for CAT, stamp duty and CGT.

Here are 5 top succession tips:

1.  Take Advice:
The stakes are high when formulating your succession strategy. A wrong step could mean unnecessary tax liabilities. It is essential that before you begin assembling your plan that you take advice regarding the tax implications of what your intentions are.


2. Start thinking now about your outline plan:
The earlier you start thinking about your plan the more likely you are going to be able to put in place a tax efficient road map to get your assets to the next generation.  

Usually parents will have a rough idea in their heads about what they wish to see happening; that for    example they want the farm to go to the eldest son; that they want another property to go to another child etc.

This really can be the difficult part of succession strategy as it can be the source of considerable tension in families seeking to accommodate all of their children.  It is important also to keep in mind that taxation is not the overriding consideration in the succession plan: this should only be a secondary consideration in balancing the competing rights of all of the siblings over the wealth of the parents.

Since the 31 March 2006 adopted children and foster children have exactly the same rights as blood children.

3. Make a will:
Best laid plans for inter-vivos transfers can be rendered obsolete if one of the disponers dies before the plan is put into effect. Remember, you may not be around at the point when your plan is implemented!  This is why having a will is so essential.

Always appoint executors that you trust; make sure they know where your current will is and you should discuss with them that it can be an onerous job lasting some time: so your executors need to be           comfortable with that.  Of course, it is also important that you make sure they are the right age profile also, there is no point in a 40 year old appointing executors who are now 65 years of age.

Creating a will is simple and in-expensive. If you die intestate (without a will), by law the assets are distributed under the succession act as follows: two thirds to the surviving spouse and one third to the children.

4. Self Assessment:
Like many taxes in Ireland, gift and inheritance taxes are self assessment taxes. You need to make a return if the gift or inheritance that you receive is 80% of your threshold (all of the threshold amounts       currently in force are set out on page one at the start of this article). Penalties for failure to make a return are quite severe (€2,535) and even worse for fraudulent returns (€6,345 and a possible prosecution).

5. Use your exemptions and reliefs:
We can all receive gifts of up to €3,000 per donor every calendar year (this basic exemption does not apply to inheritances).  As a disponer you should take advantage of this exemption each year wherever    possible to pass on tax free cash.

However there are numerous other exemptions and reliefs which can be claimed in order to minimise your CAT liability. The Dwelling House Exemption is a really important exemption: essentially a donor can gift a house tax free if whoever receives has no other house and they have occupied the house as their main residence for three years before they get it and continue to occupy the house for six years       afterwards. So, for example, a parent could set up a child in a house if they were away at college for three years, then gift the house to them tax free as long as they stay in it for another six.

Business Relief is available when transferring the family business.  Essentially business relief means that the value of qualifying business assets (premises, plant and machinery, vehicles, equipment etc) are reduced by 90% when calculating CAT.

Agricultural Relief is available when transferring the family farm. This works in the same way as business relief; agricultural assets are reduced by 90% when calculating the tax.