What is inheritence tax?

Inheritance Tax is a tax levied on an inheritance received under the Will of a dead person (know as the “Disponer”) or the death benefit from a pension plan. Sometimes, Inheritance Tax is also called Capital Acquisitions Tax but this is technically wrong as Capital Acquisitions Tax covers both Inheritance Tax and Gift Tax. Gift Tax is levied on benefits received from a person, still alive (know as the “Donor”). Gift Tax has a yearly exemption limit of  €3000, which means that the first €3000 of a gift is tax free. Both Inheritance and Gift tax is charged at 30%. Inheritance tax has various exemption thresholds, which means that below these amounts no tax is due.
An Inheritance from a Spouse or Civil Partners is deemed to be Tax free in the hands of the surviving spouse or Civil Partner.
There are three tax free threshold amounts for inheritances depending on the relationship to the Disponer.
1. A child of the Disponer has a threshold of €250,000. This includes adopted child, step-child, certain foster children, a grandchild whose parent is deceased but whose grandparent is still alive
2. A brother, sister, nephew, niece, linear ancestors or linear descendants (must be blood line relative) have a threshold of €33,500.
3. All other cases has a threshold of €16,750.
So a child can receive up to €250,000 tax free from its parents, this amount covers both parents so its NOT €250,000 from each parent. The person receiving the inheritance is responsible for paying the tax.

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