Estate Planning

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Is Capital Acquisitions Tax still a real issue for clients?

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.

The Problem

Revenue reported that, in 2011, €244million was paid in Capital Acquisitions Tax; in excess of €976 million worth of assets which people are declaring and paying Gift and Inheritance Tax on. The taxation double whammy!!

Tax Rate

The rate of Capital Acquisitions Tax, both for gifts and inheritances, has increased from 20% in 2008 to 33% in 2013.

Tax-Free Thresholds

Thresholds have been dramatically reduced. For example, the Group A 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.

The Solution

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. So the options are:

  • Lose up to 25% of the estate in inheritance tax;
  • Save €8,729.12 per annum for over 80 years to save €767,250 or;
  • Put life cover in place to protect the estate at a cost of 1.25% of the tax bill using a Life Long Insurance plan.

Target Market

  • Parents who wish to fund for their children’s tax bill in the event of their death.
  • Adult children who will have an inheritance tax bill on the death of their parents.
  • Business owners who wish to ensure the survival of their business when they pass it on to the next generation.
  • Farm owners who wish to protect the value of their land and agricultural assets when they are passed on to the next generation.

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