A Guide to Inheritance Planning for Expats Moving to Ireland

A Guide to Inheritance Planning for Expats Moving to Ireland

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Relocating to a new country is an exciting adventure, but it also comes with its fair share of challenges and uncertainties. For expats making the move to Ireland, one often overlooked aspect is inheritance planning. 

While it may not be the nicest topic to discuss before your move, proper inheritance planning is essential for avoiding unexpected surprises and ensuring compliance with local tax regulations. 

By planning ahead, you can streamline your move to Ireland, reduce stress, and focus on what truly matters — establishing yourself in Ireland. 

Understanding Inheritance Planning

Inheritance planning involves making deliberate decisions about how your assets will be distributed to your beneficiaries in the future. It can be a crucial aspect of planning for passing your wealth to the next generation, especially when relocating to a new country like Ireland. 

Whether you’re moving from the US to Ireland, relocating from within Europe, or returning home from further afield — here’s some practical steps for you to consider:

  • Start early: We suggest initiating your inheritance planning well in advance of your move to Ireland. This allows for adjustments as needed and ensures you can get your documentation in order ahead of time. However, in the event that your planning is more of a last-minute decision, a reputable tax advisor or specialist will still be able to assist you.
  • Seek expert advice: Consulting with a tax advisor or an inheritance planning expert can help you navigate the complexities of Irish tax laws. Especially when moving from a country such as the US, with a different currency and tax treatment, local knowledge of the Irish system is essential. Specialist tax and legal practitioners can ensure you consider tax and legal issues in Ireland and the country where your assets may be located/taxable.
  • Consider your beneficiaries: Before your move, it’s always a good idea to take into account the financial needs and expectations of your beneficiaries. For example, do you intend to pass certain business assets to a particular family member? Do you wish to retain a right to income from a certain asset? There are many issues to consider and they will depend on your specific circumstances. 
  • Regularly review your plan: As an expat, you’ll already understand that life circumstances can change. This is why it’s important to revisit and update your inheritance plan as needed. This involves reviewing wills you may have drafted to date and considering the tax implications of your plans in light of your move.

How is Inheritance Taxed in Ireland?

When it comes to the taxation of financial gifts and inheritance in Ireland, it’s vital to take Capital Acquisitions Tax (CAT) into account, as it can significantly impact the value of assets you receive or give during your time in Ireland.

What is CAT and How Does It Impact Expats?

CAT is a tax imposed on gifts and inheritances in Ireland and is calculated based on the value of the gift or inheritance, as well as the relationship between the donor and the beneficiary (based on three group thresholds).

Where a person receives gifts or inheritances that are in excess of the relevant group threshold during their lifetime, CAT applies to the excess at a rate of 33%.

As of September 2023, the three group thresholds for CAT in Ireland are as follows:

  • Group A: This threshold applies to gifts and inheritances between parents and their children and is currently set at €335,000. Amounts received above this threshold are subject to CAT.
  • Group B: This category includes gifts and inheritances between siblings, nieces, nephews, and other lineal descendants or ancestors. This threshold currently stands at €32,500.
  • Group C: This group covers all other relationships with a threshold of €16,250.

Note: In general, the closer the relationship between a donor and their beneficiary, the lower the tax rate. For instance, gifts or inheritances between spouses or civil partners are typically exempt from CAT.

Understanding the Validity of Foreign Wills in Ireland

When inheritance planning, many expats wonder if the will they drafted in their home country is valid in Ireland. While there is no straightforward answer, it’s crucial to review your existing will with an Irish solicitor or legal expert to ensure it complies with Irish law.

While Ireland does recognise foreign wills if they meet specific criteria, it’s sometimes advisable for expats to create a separate will or a codicil (an amendment to your existing will) in Ireland to address local assets and ensure compliance with Irish inheritance laws.

Note: As a permanent resident in Ireland without a will, your estate will likely be distributed according to the law on succession.

Estate Planning and Your Move to Ireland

One of the most integral parts of inheritance planning is ensuring your estate is in order in the event of your death. Especially as an expat who might be buying and selling property, and opening and closing bank accounts, your estate planning needs are likely to be more complex than others.

As a result, it’s essential to ensure your documentation is aligned to avoid complex paperwork or confusion for beneficiaries later.

When planning your estate, we suggest placing a focus on:

  • Real estate: If you purchase property in Ireland, it becomes part of your estate and should be addressed in your inheritance plan. For foreign property that has been sold before or during your time in Ireland, it’s also essential to retain any relevant documentation for this and file it securely (if necessary, with an Irish solicitor).
  • Foreign investments: Foreign investments may be subject to inheritance taxes in the jurisdiction they are in, as well as in Ireland. Ireland has concluded two estate tax treaties (Ireland/US and Ireland/UK). We recommend you obtain expert advice to determine if these treaties apply in your situation. Where an estate tax treaty is not in place, if tax is payable on an inheritance/gift in a foreign jurisdiction, a deduction for this tax may be available in Ireland against Irish inheritance taxes that are due.
  • Bank accounts: If you maintain bank accounts in both your home country and Ireland, it’s a good idea to specify how they should be handled upon your passing. This can include instructions on whether these accounts should be consolidated, transferred to beneficiaries, or closed. Consulting with professionals who specialise in cross-border estate matters can provide valuable guidance in this area.
  • Digital assets: Expats live in a society where it’s not only physical assets they need to consider when moving abroad; it’s also important to consider digital assets. Any assets accumulated as part of an online system, such as cryptocurrency or NTFs, should also be included in your estate plans.
  • Tax implications: Different countries have varying tax laws regarding inheritances and estates. Ensure your plan accounts for potential tax issues that may arise by speaking with a tax specialist (with international expertise!) before making assumptions about liabilities relating to your estate.

Tip: In Ireland, property deeds are the legal documents used to transfer the ownership of property from one person to another. If in possession of these documents, it’s crucial to ensure they are stored securely. In the event of death, a new set of deeds is generally drawn up to account for new home ownership, unless the beneficiary is already part owner of the house.

Partner With Expat Tax Experts for Complete Peace of Mind

Navigating the intricacies of inheritance planning in a new country can be daunting. From organising tax documents to creating an estate plan, there’s a lot to take on board!

However, the good news is — you don’t have to go it alone. Partnering with expat tax services like Expat Taxes can provide you with the guidance and support you need to make informed decisions.

Our team of professionals understands the unique challenges faced by individuals relocating to Ireland and can help you navigate the complexities of CAT tax, estate planning, inheritance matters, and much more!

Whether you’re moving from the US to Ireland, planning a nomadic lifestyle across Europe, or simply looking for clarity on tax matters, arrange a one-on-one consultation with a member of our expert team today or request a call back.

By planning ahead, you can take advantage of any available reliefs/exemptions and ensure your beneficiary designations are in order.

DISCLAIMER: The material in this article is for general information purposes only and does not constitute legal or taxation advice. Specific legal and taxation advice should be sought before acting or refraining from acting. All information and taxation rules are subject to change without notice. Expats Taxes accept no liability whatsoever for any action taken in reliance on the information in this article or any of the articles in our blog series.

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