Wednesday 21 February 2018

Death tax must be reformed to ease burden on bereaved

(stock photo)
(stock photo)

Michael McGrath

It is the wish of every parent to be able to provide security for their family. In their later years, a parent will naturally want to be able to pass on the fruits of their lifetime's work to their children and grandchildren. Whether this is in the form of the family home or savings, it is very important to parents that they are able to help secure the future financial well-being of their family.

Recent increases in property values mean that many more families are now potentially drawn into the inheritance tax net. In many areas, a modest family home can no longer be passed from parent to child without triggering a massive inheritance tax liability. This can often result in the forced sale of the property to pay the tax to the State.

The following example illustrates the problem. Say the parent of an only child died in January 2015, leaving the child with a house which was worth (on paper) €350,000 at the time. At current thresholds, the child will have to pay €41,250 in inheritance tax. Had they inherited a similar valued property in January 2011 (when property prices nationally were broadly at the same level they are now) they would have paid just €4,479 in tax. Their tax liability has gone up more than nine-fold.

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