When formulating an estate plan there are a number of initial considerations that have to be addressed. The transfer of assets can create enormous anxiety and pressure so early planning is mandatory.  The obvious although often over-looked initial question is can the client afford to do it? The future is an unknown destination. We therefore have to plan within the current regulatory and legal environment. We have to work within the current taxation regime and valuation framework also. Perhaps the value of the assets will increase as the clients get older or costs may increase. The transfer of assets during the lifetime of the giver or disponer has implications:

 – Capital Gains Tax [CGT] for the disponer

 – Capital Acquisitions Tax [CAT] for the beneficiary

 – Stamp duty on the gift

Professional advice is required in this complex area. For instance death is not a chargeable event for CGT whilst CAT is payable in the event of death. At a very high level, there may be efficiencies is gifting assets now as opposed to later. For example if assets are projected to grow, it makes sense to gift now to (i) pass on wealth, (ii) enjoy giving while living and (iii) efficiency. For instance, it may not make sense for the value to stay in your hands as passing it on death leaves a significant CAT liability. A short and simple example may prove useful in illustrating some of the key planning issues. It is important to highlight that this example represents a tiny snapshot of the issues that may arise in this very complex area.

Case study: Transfer of business within the family

Brendan offers IT services and operates as a Sole Trader

Brendan’s aim is to gift the business to his sons [Paul & David], excluding the cash component. It is important to state that there are differences in reliefs for unincorporated and incorporated businesses. Reliefs can be segmented in terms of who is transferring the assets and who is receiving the assets.

  • As Brendan has a potential CGT exposure, he may be entitled to claim Retirement relief

Let’s take a look at Brendan first and assess whether he in fact qualifies for retirement relief. CGT retirement relief can potentially reduce a CGT tax bill on the sale of such assets to zero, provided the sale satisfies certain conditions. There are a number of mandatory requirements that he needs to satisfy. An individual does not have to actually retire. Secondly, the individual does not have to dispose of the entire business. To qualify, the individual must be at least 55 years of age at the time of the disposal and must dispose of all or part of his/her qualifying assets. There are other requirements which will need to be discussed with the advisor. The value of the relief is dependent upon the age of the disponer and the relationship between the disponer and the beneficiary. There is no cap on the relief available if the assets are transferring to a child and the disponer is < 66. If an individual is older than 66 on the date of disposal, relief will only be given on proceeds of up to €3m. This business is valued at €1.45m and as Brendan satisfies all of the requirements he qualifies for retirement relief.

Hopefully the above example provides a brief illustration of the merits in seeking estate planning advice in relation to the transfer of assets.


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