With deaths due to the Covid-19 pandemic rapidly increasing, the importance of having an up-to-date will cannot be overstated, writes Declan McEvoy from ifac.
When a person dies unexpectedly without having made a valid will, the turmoil that follows can place a significant emotional and financial strain on families.
The Covid-19 pandemic has heightened awareness of the importance of making a will and many people are currently seeking to put their affairs in order.
This is not always straightforward, particularly where farms and/or other business assets are involved, so it is advisable to seek legal advice before making decisions. This will help ensure your will is valid.
Getting a solicitor to draw up your will is not expensive and will give you peace of mind that your assets will go where you want them to go.
What happens if there is no will in place?
If there is no will in place, or if your will is invalid, the Succession Act determines who inherits your assets.
If you are married or have a civil partner, and have children, your spouse/civil partner will inherit two-thirds, or your estate and your children will share the other third. This may not reflect your wishes and may not be in the best interests of your family and farm or business.
Furthermore, if your assets are distributed without taking tax consequences into account, this could leave your successors with substantial tax bills.
What taxes should I take into account when making my will?
The main taxes to focus on are Capital Acquisitions Tax, Capital Gains Tax and Stamp Duty.
Capital Acquisitions Tax (CAT) is payable by individuals who receive a gift or inheritance. If the value is below a certain threshold, it is exempt from CAT.
The threshold depends on your relationship to the person giving you the gift or inheritance. O nce you exceed the relevant threshold, CAT is charged at a rate of 33%.
CAT liability can be reduced by certain tax reliefs for qualifying individuals — for example, Agricultural Relief and Business Property Relief reduce the taxable value of the gift or inheritance by 90%.
Capital Gains Tax (CGT) needs to be considered if you decide to transfer an asset to another person during your lifetime. This tax is paid by the person disposing of the asset.
The current CGT rate is 33%. With proper planning, tax relief can alleviate the CGT burden — for example, Retirement Relief can reduce CGT to nil where the transferor is over 55 years old and meets certain requirements while Entrepreneur Relief, if applicable, can reduce the CGT rate from 33% to 10%.
Transfers made by you to another person during your lifetime may also be liable to stamp duty.
If no money changes hands in exchange for the asset, or if the amount paid is less than the market value, Revenue may charge Stamp Duty on the market value. The person who receives the asset pays the stamp duty.
If Revenue view the transfer as a gift, CAT may also be due. Transfers of property to Young Trained Farmers are exempt from Stamp Duty subject to certain conditions while Consanguinity Relief, available on land transfers in limited circumstances, potentially reduces Stamp Duty from 6% to 1%.
Next steps?
If you are making or updating your will during the current Covid-19 crisis, seek advice from your accountant and solicitor to ensure you are aware of the tax consequences of your decisions, and that your will, when finalised, will be valid.
