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.

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.

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, 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, 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 72 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.

There are three threshold groups;

• Group A €335,000 – applies to a child, stepchildren and grandchildren in certain situations.
• Group B €32,500 – applies to brothers sisters nephews, nieces, grandchildren and great grandchildren.
• Group C €16,250 – 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 33% 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 2022.