BY JOHN ELLIS, FINANCIAL ADVISOR
In today’s economic climate, passing wealth to our children has become more challenging. Rising property prices and tighter budgets mean families are more focused than ever on reducing the tax bills associated with gifts and inheritances.
Recent discussions in the media about inheritance and gift tax thresholds highlight the importance of planning ahead. The recent Budget made some small effort with tax levels and now your children are entitled to a new life time tax-free threshold of €400,000 in respect of gifts and inheritances from you. This ‘lifetime tax-free threshold’ is the maximum amount your child can inherit or receive as a gift from you without paying tax.
Many of us want to help our children and grandchildren financially — whether it is contributing to a house deposit, paying for education, or transferring property. However, transferring assets like property or large sums of money can trigger a gift tax liability for the recipient.
To help ease the problem you could set up a special type of savings plan called a Section 73 policy. You make regular payments into this policy for at least eight years. Then, when you are ready to make the gift, you can use the proceeds from this policy to cover the gift tax liability.
The key advantage here is that, assuming you have met the specific conditions of the policy, the money used to pay the tax will not be treated as an additional gift. This means your child avoids a bigger tax bill and receives more of your intended gift.
Here is what makes a Section 73 policy so beneficial:
It offers a structured way to save for potential gift tax. You commit to regular contributions over time, making it easier to plan and manage your finances.
The proceeds are specifically earmarked for gift tax payments. This ensures that the funds are readily available when needed, without impacting your other financial commitments.
It provides peace of mind for both you and your beneficiaries. You can rest assured that your loved ones will receive your intended gift without facing an unexpected tax burden.
It is important to remember that a Section 73 policy is not a way to avoid gift tax altogether. However, it provides a smart and effective way to manage that liability, ensuring that more of your wealth goes to your loved ones.
Planning for your family’s future is one of the most thoughtful gifts you can give. By exploring tools like a Section 73 policy, you can ensure that your loved ones benefit fully from your generosity without unnecessary tax burdens.
Take the first step today by consulting a qualified financial advisor or give us a call to explore your options and secure your legacy.
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