Chapter 1: What is the main topic discussed in this episode?
The Clare Byrne Show on Newstalk. With Aviva Insurance. Now, what's the best way to pass on your money? The rules around inheritance tax are complex and not taking the time to understand them could mean that our loved ones are left with a hefty bill when we're gone. Well, joining me now to tell me more is MD of DNG Financial Services, Cian Carroll.
And Cian, thank you very much for being with us. It's one of these topics that people don't really like to think about. Until they absolutely have to. But you're saying you need to take the time out, understand the rules because somebody will pay if you don't.
Yeah, I suppose it's a pretty divisive topic.
Chapter 2: What is the best way to pass on your money?
And what I've learned over my years in this industry is that people, we don't like talking about money. We don't like talking about death and we don't like talking about what happens.
when the inevitable comes along and I suppose the message really is to plan early and you don't need to become a tax expert, I'm not, but it's, you know, it's about taking advice, taking legal advice in terms of setting up the will appropriately, nice and early. It's about understanding the tax implications of what you determine your wishes to be within your will.
And then it's making a financial plan to provision for different considerations that come when a tax, an inheritance tax liability does arise.
I think the old understanding of this was that this conversation was for the wealthy. You know, rich people need to worry about inheritance tax. But now if you have a house, you have to think about it.
Yeah, and property prices have probably really driven this and it's become very much like almost an everybody problem. Certainly you talk about
if you own a house in Dublin there's a very good chance you know depending on the size of your family and how many kids you might have like it's almost certainly no longer just a wealthy problem and and so yeah like I mean if you consider you know a single child household and you you know your parents that have a house that's worth six hundred thousand straight away and that's not that's not a crazy that's a modest three-bed semi-detached house in Dublin these days and
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Chapter 3: Why is understanding inheritance tax important?
You know, you're talking about that child having a fairly substantial consideration and having to make maybe decisions that they don't want to have in terms of selling of a house.
So just on that example, that child is paying tax on the 200,000 above 400,000, is that right?
And that's assuming that they haven't received any early inheritance or gifts over the years as well, right?
Because that's their total allowance, 400,000. That's their total lifetime allowance.
Yeah, so assuming that there's been no previous gift or early inheritance, then anything over the 400,000. So they have a 33% capital acquisition tax liability on that 200,000. So it's not insignificant.
And this is not like when you sell the house, you pay the money. This is when you inherit the house, you owe that money.
Yeah, so if the inheritance happens in 2026, you have a pretty tight deadline until the following October 2027 to get that settled. And so you've decisions to make. And so if it's a case that there's no, I suppose, cash that's been inherited within the estate and let's say, and if you're kind of a normal working class family yourself and you don't necessarily have the savings to pay it yourself,
You know, you might be left with a difficult decision to sell the house to pay that liability. And look, there's emotional attachments with family homes, et cetera, as well. You might have grown up there and, you know, there's lots of good reasons why you might not want to have to sell, particularly at a time of emotional distress as well. So it's just about planning early.
And there are some things that you can do. Like, it's not a case that you can completely avoid the tax situation.
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Chapter 4: What are the common misconceptions about inheritance tax?
And that's something that forms a core part of financial planning as well.
Okay. Okay, so more questions. Can siblings gift ā¬3,000 to each other? They can, can't they?
They can. Yeah, the ā¬3,000, it's agnostic as to who the relationship is or what the relationship is. It can be passed from anyone.
So that means then that the next question is answered too from that person. They want to know, is this capped at the ā¬40,000 that you can inherit from a sibling?
Yeah, so that 3,000 euro annual small gift exemption sits outside of the inheritance tax threshold.
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Chapter 5: How do property prices affect inheritance tax liabilities?
So if you were to gift a sibling 5,000 euro in one year, well, in theory, 2,000 euro gets knocked off that 40,000 euro capital acquisition tax free threshold.
But the 3,000, you could do it for 20 years every year and it wouldn't affect the threshold.
Absolutely.
Can you ask if you need to declare the 3,000 euro gift to Revenue?
My understanding is you don't need to declare that, but your capital acquisition tax, so if you do inherit or if you are gifted monies, it's side of that, you do need to declare that. That's self-declaration.
And Dee would like to know the answer to this question. I'm living with someone for the last 20 years. We jointly own our house. If my partner dies before me, am I liable for any inheritance tax on the property? It's yours.
Yeah, so it depends on the ownership. So if it's owned joint tenants, so they own their 50%, like assuming that they're not married, right? It seems that way, I think. Yeah, so they would own their 50% share of the house. And there's potentially an inheritance tax liability on... The other 50%. Yeah, but depending on the relationship there as well.
So, yeah, I think that definitely requires legal advice and tax advice specifically around that. You need to get married. Yeah, it's, I mean, often that is... I mean, people do, don't they, to deal with this problem? Yeah, that's the margin of convenience to deal with potential unintended tax consequences, yeah.
Cian, thank you very much for all of that advice. There's great interest in it. Cian Carlin is MD of DNG Financial Services. The Clare Byrne Show. With Aviva Insurance. Weekday mornings at 9. On Newstalk. Conversation that counts.
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