There may be a perception that, given the recent reduction in estate and asset values, the need to plan for Capital Acquisitions Tax has gone away. If you look at some of the underlying facts, however, the truth is very different.
Revenue reported that, in 2011, €244million was paid in Capital Acquisitions Tax; in excess of €976 million worth of assets which your clients are declaring and paying Gift and Inheritance Tax on.
The rate of Capital Acquisitions Tax, both for gifts and inheritances, has increased from 20% in 2008 to 33% in 2013.
Thresholds have been dramatically reduced. For example, the group 1 threshold from parents to children reduced from €521,208 in 2008 to €225,000 in 2013.
Mr and Mrs Kelly are aged 55 and their estate, valued at €3,000,000, is to be divided equally between their three children. Their children’s inheritance tax bill will be €767,250 - i.e. 25% of the estate will be taken in tax.
Use a Life Long Insurance plan with life cover of €767,250 to pay the tax bill. The premium (exclusive of the government levy) is €8,729.12 per annum.