How To Avoid Inheritance Tax In Ireland

Know the Rules

Inheritance tax, officially known as Capital Acquisitions Tax (CAT), is a significant financial consideration for those planning their estate and for beneficiaries receiving an inheritance. Understanding the rules can help you take steps to minimise liability.

1. Thresholds & Tax Rate – In Ireland, inheritance tax is currently charged at 33% on amounts above certain thresholds. These thresholds vary depending on the relationship between the deceased and the beneficiary.The current CAT thresholds, effective from October 2, 2024, are:

• Group A: Children inheriting from parents – €400,000
• Group B: Siblings, nieces/nephews, grandchildren – €40,000
• Group C: All others – €20,000

These updated thresholds reflect the changes introduced in Budget 2025 to account for rising property values.

2. Who Pays? – The beneficiary (the person receiving the inheritance) is responsible for paying any applicable tax.
3. Spousal Exemption – A spouse or civil partner is exempt from inheritance tax, meaning they can inherit any amount tax-free.

Take Advantage of ‘Gift’ Exemptions Ahead of Time

A smart way to reduce inheritance tax liability is to make use of the small gift exemption during your lifetime.

How it Works – You can gift up to €3,000 per person per year without it affecting their inheritance tax threshold. This means parents could collectively gift a child €6,000 per year tax-free.

• Practical Example – If a parent gifts their child €6,000 every year for 10 years, that child receives €60,000 entirely tax-free, reducing the taxable estate.
• Multiple Beneficiaries – This exemption can be used for multiple individuals, meaning a grandparent could gift to grandchildren as well, spreading the benefit across the family.

Strategic gifting over time can significantly reduce the taxable portion of an estate, ultimately lowering the inheritance tax burden.

Use Life Insurance to Take Care of Liability

Another effective way to prepare for inheritance tax is through life insurance, specifically a Section 72 policy.

• What is a Section 72 Policy? – This is a life insurance policy taken out to cover inheritance tax. When the policyholder passes away, the proceeds are used specifically to pay inheritance tax, preventing beneficiaries from having to sell assets to cover the tax bill.
• Why It’s Useful – Many families inherit property, which can push them above the tax-free threshold. Without sufficient funds, they may need to sell the property to cover the tax. A Section 72 policy provides the necessary cash to settle tax liabilities.
• Learn More – Read our full guide on Simplifying Section 72 & Paying Less Tax on Inherited Policies.

Get Advice from an Expert

Inheritance tax can be complex, and each family’s situation is unique. Seeking professional financial and legal advice ensures you’re taking the right steps to protect your wealth and minimise tax liability.

• Estate Planning Strategies – Financial advisors can help you structure your assets in a tax-efficient manner, making full use of exemptions and reliefs.
• Legal Guidance – A solicitor can assist with wills and trusts, ensuring everything is legally sound and aligned with your wishes.
• Personalised Advice – Every estate is different, and working with an expert means tailored advice to suit your family’s needs.

Planning ahead can make a significant difference in reducing the impact of inheritance tax on your loved ones. If you’d like expert guidance on inheritance tax planning, book a Financial Planning Consultation with our experts today.

This article does not constitute tax or legal advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. for guidance, seek professional, independent, advice. This article is for general information purposes and is not an invitation to deal or address your specific requirements. Any expressions of opinions are subject to change without notice. The information disclosed should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information of the various source material, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future.