Will making resolutions

Planning the terms of your Will may be on your list of New Year’s resolutions. If so, there is some good news and some bad news following the passing of the Finance Act 2016 on Christmas Day.

 CAT Threshold increase

The good news is that the Capital Acquisition Tax (CAT) thresholds have been increased so that each of  your children can now receive the sum of €310,000 tax free, an increase of €30,000. The threshold for other relatives is increased to €32,500 and the threshold for strangers is increased to €16,250.

 Dwellinghouse relief

However, the exemption which allowed a person to transfer or purchase a house for another person as long as it was lived in by the beneficiary for three years prior to the gift or inheritance has been restricted. It now only applies in inheritance situations so the possibility of lifetime gifts is removed, unless the donor is a dependent relative. The following conditions must be met:

  1. The property is inherited by a beneficiary who has occupied it as his or her only or main residence for 3 years immediately prior to the inheritance
  2.  The property was occupied by the donor as his or her main residence at the date of death
  3.  The property is the only residential property that the beneficiary is beneficially entitled to
  4.  The beneficiary retains the property for 6 years as their only or main residence

 

The relief also applies to lifetime gifts to dependent relatives. A dependent relative is someone who is physically or mentally incapacitated or who is over 65 years of age.

This measure was introduced to plug a perceived abuse where parents were able to transfer houses to their children tax free where there was no element of dependency. It was believed that the exemption was being used by wealthy families as a mechanism for passing wealth to the next generation tax free.

So now that you know what the new rules are, make it your resolution to put your Will in place.

If you require any further advice on the contents of this article or on making your Will please contact Owen Burke at o.burke@beauchamps.ie