Inheritance tax: how to beat the trap.

With inheritance tax in the news, what better time to talk to one of our leadingexperts: Suzanne O’Neill. Chartered Tax Advisor with Top Ten accountancy firm RSM. Suzanne has over 25 years of experience dispensing valuable advice to clients. Here she shares plenty of tips that could save you tens of thousands of euros.

What does the budget mean for inheritance tax?  The parent/child threshold of €335,000 increase(d) to €400,000.   This will allow a child to inherit €400,000 from their parents before inheritance tax needs to considered.

What is your top tip for avoiding inheritance tax?   Basic steps to reduce future inheritance tax include:

• Spreading the estate across family members, such as children, grandchildren, sons/daughters in law,  to widen the tax-free thresholds. 

• Gifting the annual €3,000 small gift exemption (€6,000 from a couple) to these various family members where they have surplus cash to achieve that. 

Of course, looking after their own needs first is always paramount.  Lifetime gifting of assets can be worthwhile, depending on current value and potential future value, but other taxes such as capital gains tax and stamp duty need to be considered also.

Apart from those tips, can we completely avoid inheritance tax ? 

A valuable relief, Dwelling House Relief, can enable a house to be inherited without any tax applying.  However, the conditions to qualify for this relief are very stringent.  For example, in the case of a parent and their son/daughter, the son/daughter must not own any other house and they must have lived in the house with the parent for three year prior to inheritance.

What are your top tax saving tips for clients who aren’t mega-rich?  Be mindful of the advantages of pension saving and the tax relief available at the top tax rate and aim to build up a saving fund from an early age. Also ensure you are claiming any credits that you are entitled to. 

What would you do if finance minister on budget day?  Taxes are only a part of the issues to address.  I think the big issues of the day remain housing, health, childcare.   Finding a way to make meaningful changes that address these in the long run is key.

What was your first job and how much did you earn?  Making ends meet was tough as a trainee accountant, although rent cost as a proportion of income was much lower then. 

What did your parents teach you about money?  Money was tight when I was growing up and so I am grateful for the fact that times are better now than in 1970/80s and that I have less worries.   However, I worry for the next generation because of the property situation.  

What was your best and worst investment?  I am not really a risk taker.  I did invest in Eircom shares back in the day.  I should have flipped them quickly and didn’t and that wasn’t wise as the value plummeted.