Inheritance Tax

An inheritance arises when property of any nature passes on a death to any other person. An inheritance is taken where a person, called a successor, becomes entitled in possession under any disposition (e.g. deed, will, intestacy, etc.) on a death to a benefit and does not give full value for it. Examples of inheritances are:

Under a will A leaves a legacy of €100,000 to his brother B. Under an intestacy B is entitled to a share in the estate as one of the next of kin of A. (An intestacy occurs where a person dies without having made a will.)

In each case, B takes an inheritance on A’s death. A is the disponer and B is the successor. Inheritance tax is charged where the successor becomes immediately entitled to the benefit. Future interests are not taxed until such time as they fall into possession. For example, if A by will leaves property to B for life and then to C on B’s death, C is not liable for inheritance tax until B dies. C’s interest is a future interest which is not liable to inheritance tax until B dies.

What are the tax free thresholds?

As in the case of gifts, there are three tax-free thresholds. These thresholds depend on the relationship between the person receiving the inheritance (the successor) and the person who gave the inheritance (the disponer).

The group thresholds for 2010 below apply to the successor – the person taking the inheritance.

Group A: €414,799. This applies to a child, a step child, a foster child in certain circumstances and to a grandchild under the age of 18 of the disponer whose parent is dead. It also applies to a parent who takes an immediate (not a life interest) inheritance on the death of a child.

Group B: €41,481. Included in this class are brothers, sisters, nephews and nieces, grandchildren and great grandchildren.

Class C: €20,740. This applies to a successor who does not come under Class A or B. These thresholds can be reached either by a single inheritance or by a series of gifts and inheritances over a period of years. Only prior gifts and inheritances to which the same group threshold applies are aggregated (added together) for the purposes of calculating tax.

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