Estate planning remains a critical part of financial planning in Ireland, particularly as wealth transfers between generations continue to increase. While the purpose of estate planning is not to eliminate tax entirely, it is about ensuring funds are available to meet tax liabilities so that assets can pass to beneficiaries with minimal disruption.
Proper planning can prevent situations where beneficiaries are forced to sell assets simply to pay a tax bill.
Understanding Estate Planning
Estate planning focuses on ensuring your assets transfer to the right people in the most tax efficient and structured way possible. It involves preparing for potential Capital Acquisitions Tax liabilities and putting funding mechanisms in place where appropriate.
Effective planning provides liquidity to cover tax bills rather than placing pressure on inherited assets such as property, farmland or business interests.
What Tax Is Payable?
The primary tax involved in estate planning is Capital Acquisitions Tax (CAT).
CAT applies to gifts and inheritances received over a person’s lifetime. This includes:
Cash
Property
Shares
Land
Cars
Other valuable assets
The tax is currently charged at 33 percent on amounts above the relevant lifetime threshold.
Current CAT Lifetime Threshold Ranges
The lifetime tax free thresholds have increased as follows:
Group A: €335,000 to €400,000
Typically applies where a child inherits from a parent.Group B: €32,500 to €40,000
Typically applies to nieces, nephews, grandchildren and certain other relatives.Group C: €16,250 to €20,000
Applies to all other beneficiaries, including non relatives.
These are lifetime thresholds. Any previous gifts or inheritances received within the same group reduce the remaining available threshold.
Example: €500,000 Inheritance
Let us consider a €500,000 inheritance:
If left to a child
First €400,000 tax free under Group A
Remaining €100,000 taxed at 33 percent
Tax liability: €33,000
If left to a niece or nephew
First €40,000 tax free under Group B
Remaining €460,000 taxed at 33 percent
Tax liability: €151,800
If left to a friend
First €20,000 tax free under Group C
Remaining €480,000 taxed at 33 percent
Tax liability: €158,400
The difference in tax outcomes is significant, which highlights why structured planning is so important.
How to Reduce Potential CAT Liability
While CAT cannot always be avoided, it can be planned for and funded correctly. Understanding how the thresholds apply allows families to:
Distribute assets efficiently
Utilise both parents’ thresholds where appropriate
Make lifetime gifts to gradually use allowances
Use the Small Gift Exemption of €3,000 per disponer per year
Section 72 Inheritance Tax Life Cover
This is a Revenue approved life assurance policy designed specifically to cover inheritance tax liabilities.
Key features include:
Must be approved by Revenue
Premiums paid by the person taking out the policy
If established jointly between spouses, benefits are payable on second death
Proceeds used to pay inheritance tax are not subject to CAT
Any surplus not used to pay tax may be taxable
This structure ensures beneficiaries have cash available to pay tax without selling property or business assets.
Section 73 Gift Tax Savings Policy
This policy helps fund gift tax liabilities arising from lifetime transfers.
Conditions include:
Must be Revenue approved
Premiums paid by the disponer
Premiums must be paid for a minimum of 8 years
Premium cannot increase by more than 50 percent of the original premium
Proceeds must be used within 12 months to pay the gift tax
When structured correctly, the proceeds can be exempt from CAT when used to pay the liability.
Final Thoughts
Estate planning in Ireland is about preparation and structure. It ensures your beneficiaries receive your assets in the most efficient way possible and are not burdened with unexpected tax bills.
Professional advice can help tailor a strategy suited to your family structure, asset base and long term objectives.
This information is based on the tax legislation in March 2026 and could be subject to change.