Property Investors – Inheritance and Gift Tax
This tax needs to be borne in mind if property is intended to be passed on within the family. There is no tax due on transfers between spouses. However, tax is payable on transfers to children where the value of all benefits obtained since 4th December 1991 exceeds €280,000.
Bearing in mind property values it would not be difficult to exceed this threshold. For lifetime transfers capital gains tax may also arise on the transfer of a property to a child. However, only the greater of the two taxes is payable.
Different approaches have evolved over the years in finding methods of reducing the level of tax payable and also to provide funding for whatever tax is payable.
Acquiring properties in the names of children can help avoid tax on future transfers to them. The use of Trusts can also have a role to play in this area particularly where substantial tax liabilities may be involved.
Advice in advance is the only way to plan for this particular tax combined with the use of life assurance products to provide funds to pay whatever tax liability may arise.
Lifetime Transfers to Children
As already mentioned a lifetime transfer of a property to a child may give rise to Capital Gains Tax, Gift Tax and Stamp Duty. It may be possible to offset the Capital Gains Tax against the Gift Tax so that only the greater of the two taxes is payable.
However, the benefit of a lifetime transfer is to ensure that all future increases in value arise for the child and will not be part of your estate for inheritance tax purposes so that a tax saving is obtained in the future.