How do I make a will for my family when I live abroad?
Ask the Experts: Inheritances between spouses are exempt from Capital Acquisitions Tax no matter what their nationality
I have made a last will and testament with my wife as the sole beneficiary
I’m an Irish national and have been living and working in the Middle East for more than 10 years. I am currently non-resident and not ordinarily domiciled in Ireland. My wife is not domiciled in the State and we are planning to return to Ireland in the next couple of years.
My children were born in the Middle East and have Irish passports. I have a property in Ireland and also hold a savings account (outside of Ireland). I had made a last will and testament some time back with my wife as the sole beneficiary. I understand that the threshold for tax in the Irish State is €310k for a spouse and thereafter the amounts are subject to tax.
1. Does this apply to a non-national spouse?
2. Is there any wording available for a will and testament that would highlight that amounts over € 310k could be split between my children?
3. Is there anything else I should be aware of?
Answer: Barry Flanagan, director of tax, www.taxback.com
The position currently in Ireland is that gifts and inheritances are taxable where:
- The beneficiary is resident or ordinarily resident in the State at the date of the gift/inheritance, or
- The disponer is resident or ordinarily resident in the State at the date of disposition, or
- The property in the gift/inheritance is situate in the State
However, a foreign domiciled person will be deemed to be non-resident and non-ordinarily resident in Ireland unless he/she was resident for all of the five consecutive years of assessment preceding the date of the benefit and on that date is either resident or ordinarily resident in the State.
Under spousal exemption, gifts and inheritances taken between spouses are exempt from Capital Acquisitions Tax (CAT) no matter what spouse nationality is. Therefore, the estate can be left in full to your spouse without Irish tax consequences and (should you choose) no amendment is required to your last will as it currently stands.
The relationship between the person who gives the gift or inheritance and the beneficiary is central to assessing the CAT liability. This is because, depending on that relationship, a certain level of benefits may pass before a liability to CAT will arise.
This non-taxable level is known as a CAT group threshold - the lifetime tax-free threshold that can be applied in calculating the taxable value of any gift or inheritance between persons within the same group.
The current group threshold A that applies to a gift or inheritance from a parent to a child is €310,000, group threshold B that applies to a gift or inheritance to nieces, nephews and lineal ancestors is €32,500 and group threshold C of €16,250 applies to other relationships.
Another way to reduce chargeability to CAT is the €3,000 annual gift exemption. This exemption applies to gifts generally - the relationship between the parties is not relevant. Therefore, the small gift exemption is available per calendar year from any one disponer.