WHAT IS A WILL ?
A will is a legal document that sets out the wishes of the testator (person making the Will) with regard to the distribution of the estate (net assets) of the testator after the death of the testator.
CAN A WILL AFFECT FUTURE TAX LIABILITIES ?
A Will can if structured correctly be used to minimise the beneficiaries future inheritance tax liabilties. There are various reliefs, exemptions and thresholds which if utilised correctly will avoid or reduce the liability to inheritance tax.
WHAT HAPPENS IF I DO NOT MAKE A WILL?
Where a deceased person has not made a Will then that person is deemed to have died intestate. The Succession Act, 1965 sets out the law as to how the distribution of an intestate estate is distributed. If you do not make a Will the beneficiaries of your estate may be people who you did not wish to benefit from your estate or may be granted a greater or lesser share than you would otherwise have intended had you made a Will.
An executor or personal representative is the person who collates the assets of the deceased, pays all debts, taxes and expenses of the estate and distributes the remaining assets to the beneficiaries. Generally, a testator will appoint a member of the family, a trusted friend and/or a solicitor, The person appointed should be over 18 years of age, of sound mind and capable of handling financial matters. It is not unusual for a testator to appoint two executors and to direct that each can act independently of the other in case one of the executors should predecease the testator.
A guardian is legally responsible for a child’s physical care, health, education and welfare until such time as the child reaches the age of eighteen. A guardian can be appointed by Will but it is important that the testator contacts the intended guardian in advance to ascertain that the intended guardian is agreeable to so act. In most cases, both parents are guardians but we recommend that an alternative guardian be appointed. The guardian should have good parenting skills and usually, a family member or trusted friend is appointed.
Inheritance Tax is payable by a beneficiary on the death of someone. The amount of tax payable will depend on the proximity in blood of the beneficiary to the deceased, to the amount of the inheritance and whether there have been prior gifts to the beneficiary. However, certain classes of beneficiaries are exempt from Inheritance Tax and certain inheritances will be exempt from Inheritance Tax if the value of the inheritance falls below certain thresholds. Since January 1985 a spouse’s inheritance is exempt from Inheritance Tax no matter how valuable the inheritance. In addition, there are exemptions and reliefs available in respect of agricultural property, business property and certain dwelling-houses.
Inheritance Tax must be paid within four months of the valuation date. If not paid within this time, interest will be payable. The valuation date will depend on the facts of the case.
Subject to certain conditions, Section 60 insurance policies are exempt from tax when the proceeds are used to pay Inheritance Tax. The value of the policy will not be computed in assessing the tax liability.
TAX FREE THRESHOLDS
Who will know I am making a claim ? Details of your claim are treated in the strictest confidence. Only the party you are claiming against will be aware of your claim. The vast majority of cases are settled. However, if your matter proceeds to a full hearing your case will be held in open Court.
There are three threshold groups namely
Group A €225,000 – applies to a child,stepchildren and grandchildren in certain situations.
Group B €30,150 – applies to brothers sisters nephews, nieces, grandchildren and great grandchildren.
Group C €15,075 – applies to anyone who does not fall under groups A and B
In assessing Inheritance Tax is important to aggregate prior gifts since December 1991 in respect of the same group threshold. Tax is payable at the rate of 20% of the excess over and above the threshold. The thresholds are indexed linked in line with the Consumer Price Index each year. The above thresholds are applicable for 2008.
An EPA is a legal document that appoints an attorney to make decisions on your behalf in relation to your welfare and|or property and financial affairs in the event that at some time in the future, you lack the capacity to make these decisions for yourself. A statement signed by a medical practitioner and a solicitor to the effect that the donor (the person making the EPA) has capacity at the time of executing the forms and that the donor understands the nature and effect of the EPA. The statement from the solicitor should also state that the donor is not acting under undue influence. The attorney must agree to act and must sign the EPA.
WHO SHOULD YOU APPOINT?
You should appoint somebody you trust to act as your attorney. If it is intended that your attorney is to manage your financial affairs then the appointed person should be someone who is capable of dealing with your financial matters.
HOW MANY ATTORNEYS SHOULD YOU APPOINT ?
It is a good idea to appoint more than one attorney. In effect, this will ensure that there is no breach of the responsibility with which the attorney is empowered.
REGISTERING AN EPA
The attorney must register the EPA in the High Court in the event that the donor is becoming or has become mentally incapable. Notice of the application must be served on the donor and others. The attorney must obtain a medical certificate to the effect that the donor is incapable of managing his or her affairs.
The Court assumes a supervisory role. Application can be made to the Court for directions with regard to the management and disposal of property. If the EPA has been registered it cannot be revoked without the permission of the Court
If you would like to instruct us to draft an EPA, please click here and submit your details.