You’re not alone if you’re unsure how to handle inheritance and gift taxes.
Many people struggle to understand them, especially with so much legal and financial jargon involved.
Words like beneficiary, executor, probate, threshold, and valuation are constantly thrown around. But what do they mean?
Whether you’re sorting out your own will or receiving an inheritance, it’s important to have a good grasp of these terms to ensure you’re well-informed.
We’ve put together this glossary to help you make your way through the inheritance process with clarity and confidence.
Ready to get started? Let’s break down each term (and include a real-world example) to ensure you completely understand the Irish inheritance tax system.
File your tax return with Inheritance Tax Returns.
Received a gift or inheritance? We’re here to help you with your inheritance tax. We’ll assist in filing your tax return, claiming all available exemptions and exclusions (like spousal transfers or agricultural relief), and keeping you compliant with Irish tax laws.
Your tax situation may be unique, but our goal is always the same: to help you save money by reducing your tax bill and avoiding mistakes.
Inheritance and Gift Tax Glossary
Here’s a quick breakdown of the most important terms you’ll encounter when dealing with inheritance or gift tax.
Beneficiary
Definition: A person (or organisation) chosen to receive money, property, or other assets from a will, trust, or insurance policy.
Example: If a father leaves his house to his daughter in his will, she’s the beneficiary of the house. Or, if someone leaves a portion of their wealth to a dog rescue charity, that organisation becomes the beneficiary of the donation.
Bequest
Definition: A gift of money, property, or other assets left to someone in a will.
Example: A grandparent might leave €10,000 to their grandchild as a bequest. Sometimes, bequests come with a few strings attached, meaning the person only gets the money if something specific happens. Something like, “My son will get €50,000 if he finishes university before he’s 25.”
Codicil
Definition: A legal document that makes small changes or updates to a will without writing a new one. It must be signed and follow the same legal rules as the original will.
Example: Someone might leave their car to their brother but later decide to give it to their niece. They can create a codicil to update that part of the will without redoing the whole document.
Devise
Definition: A gift of real estate (like land, a house, or a relevant business property) left to someone in a will.
Example: If a grandfather leaves his family’s farm to his granddaughter – that’s a devise. Similarly, if someone leaves a piece of land to a charity in their will, that counts as a devise, too.
Disponer
Definition: The person who provided the gift or inheritance.
Example: A mother who leaves her engagement ring to her son is the disponer of the gift.
Estate
Definition: Everything a person owns at the time of their death.
Example: A person’s estate may consist of their house, car, savings, and personal belongings.
Executor
Definition: The individual named in a will to handle the deceased person’s estate and ensure their assets are distributed according to the will.
Example: The executor can be a professional, such as a lawyer, an accountant, or a family member, who is trusted to handle the estate and distribute assets to beneficiaries.
Exemptions
Definition: These are specific situations where inheritance or gift tax doesn’t apply.
Example: The Small Gift Exemption allows small gifts (up to the value of €3,000) to be given without tax. The Dwelling House Exemption means you can pass down a family home without tax if the beneficiary has lived there for at least 3 years before inheriting it.
Grant of Probate
Definition: A legal document that confirms the executor’s authority to administer a deceased person’s estate.
Example: After someone passes away, the executor will need a Grant of Probate to show they have the legal right to handle the person’s estate (like selling their house or giving away their belongings).
File your tax return with Inheritance Tax Returns.
Received a gift or inheritance? We’re here to help you with your inheritance tax. We’ll assist in filing your tax return, claiming all available exemptions and exclusions (like spousal transfers or agricultural relief), and keeping you compliant with Irish tax laws.
Your tax situation may be unique, but our goal is always the same: to help you save money by reducing your tax bill and avoiding mistakes.
Grant of Representation
Definition: A legal document that gives someone the right to manage and distribute a deceased person’s estate.
Example: If someone passes away, and their sibling is named in the will to handle the estate (as the executor), the sibling would need a Grant of Representation to access the deceased person’s bank accounts and distribute their belongings.
Group Threshold
Definition: The maximum amount a beneficiary can receive tax-free from a disponer (the person who provided the gift or inheritance) based on their relationship.
Example: If a father leaves €100,000 to his daughter, she may be able to receive the full amount tax-free, as the Group A threshold (for children) is €400,000. But if the same amount is left to a friend, the friend may only be able to receive up to €20,000 tax-free because they fall under Group C (for non-related people).
Intestate
Definition: The situation when someone dies without a will, and their estate is divided up according to legal rules of succession.
Example: If a man passes away without a will and has a spouse (or civil partner) and two kids, his estate would be split so that his spouse gets two-thirds, and his children share the remaining third. If there were no children, the spouse would inherit the entire estate. If one of the children passes away, their share will go to their children (the man’s grandchildren).
IT38
Definition: The form used to file a Capital Acquisitions Tax (CAT) return.
Example: If someone receives an inheritance or a gift over the tax-free threshold, they must complete an IT38 form to report it to the Irish Revenue for CAT purposes.
Nomination
Definition: A formal instruction stating who should receive certain assets, like life insurance or pension benefits, after someone passes away.
Example: If a person has life insurance and fills out a nomination form, they can appoint their spouse to receive the payout when they pass away. This ensures the money goes directly to their spouse without going through the will.
Powers of Revocation
Definition: The right to cancel or change the terms of a trust or legal agreement after it has been created.
Example: If a parent sets up a trust for their children but later has another child and wants to add them as a beneficiary, they can use their powers of revocation to update the trust.
Prior Aggregable Benefits
Definition: The total taxable gifts and inheritances a beneficiary has received from the same group threshold since 1991, which affects their tax liability.
Example: If someone has already received €200,000 in gifts from a parent since 1991, this amount counts toward their tax-free threshold. Since the parent-to-child threshold is €400,000 (Group A), they can receive up to €200,000 more before paying tax.
Probate
Definition: The legal process of validating a will and administering the deceased’s estate.
Example: If a person dies, their will goes through probate to ensure its validity. After that, the executor can pay any debts and give the person’s money and belongings to those named in the will.
Survivorship
Definition: A legal rule stating that when one owner of jointly owned property dies, their share automatically goes to the surviving owner.
Example: If two siblings jointly own a house, and one of them passes away, the surviving sibling automatically becomes the sole owner of the property.
Taxable value
Definition: The part of a gift or inheritance taxed after deducting any exemptions or reliefs.
Example: If someone inherits a house worth €455,000 and is eligible for the €400,000 tax-free threshold (for a parent-to-child inheritance), only €55,000 would be subject to CAT (currently 33%).
Tenancy in Common
Definition: A joint property ownership where each owner has a separate share. When one owner dies, their share goes to their heirs – not automatically to the other owners (like in a survivorship).
Example: If two people own a house as tenants in common, and one person dies, their share of the house would go to their children, not the other living owner.
Thresholds
Definition: The limits at which inheritance or gift tax needs to be paid. The amount depends on how close the person receiving the gift or inheritance is to the person giving it.
Example: If a person inherits €65,000 from a deceased sibling, they won’t have to pay CAT on the first €40,000, as they fall into CAT Group B. The remaining €25,000 will be taxed at the current CAT rate of 33%.
Valuation
Definition: This is the process of determining the value of an asset (like a house or land) when it’s inherited or gifted so the right amount of tax can be calculated.
Example: If someone inherits a property, a professional valuation will determine its market value, which will be used to calculate the inheritance tax.
Closing thoughts
Now that you have all these key terms, you’re ready to confidently tackle the complexities of inheritance and gift taxes.
Whether you’re planning your estate or handling an inheritance, it can be a tricky process. Feel free to refer to this list anytime you need a quick refresher or clarity.
File your tax return with Inheritance Tax Returns.
Received a gift or inheritance? We’re here to help you with your inheritance tax. We’ll assist in filing your tax return, claiming all available exemptions and exclusions (like spousal transfers or agricultural relief), and keeping you compliant with Irish tax laws.
Your tax situation may be unique, but our goal is always the same: to help you save money by reducing your tax bill and avoiding mistakes.
