Large parts of Ireland, having generated material net wealth for arguably the first time, are now grappling with the complexities that real wealth brings. The latest gift and inheritance tax metrics, covering 2025, surpassed €1 billion; and net wealth has doubled in the last decade, reaching €1.3 trillion last year, a figure that is also expected to double again in the next decade. As more of the first generation of wealth creators pass away, gift and inheritance tax receipts should compound; meaning that the current levels may only be the tip of the proverbial tax iceberg.
Without proper planning and advice from qualified, experienced wealth management professionals, the single biggest beneficiary of your estate may well be the State, rather than your loved ones.
The wealth
The wealthiest 10 per cent of Irish households hold almost 50 per cent of total net wealth, but while clearly heavily concentrated, this is less than the comparable figures in the UK (57 per cent) and the US (68 per cent). The next 40 per cent of Irish households hold roughly 40 per cent of the remaining total wealth. This supports what we, at Quilter Cheviot Europe, are seeing on the ground with a meaningful portion of society now looking at their options in terms of wealth management for the first time. This is certainly not confined to the larger cities of Dublin, Cork, Limerick or Galway. It is across every town and village.
Furthermore, although wealth remains concentrated in property, Irish households have become better at diversifying and, critically, are now less reliant on debt. Wealth is spread across public and private shares, bonds and cash, although concentration risk in one asset class is still commonplace. Each asset type brings its own tax complexity, with both pitfalls and opportunities.
RM Block
The tax
Ireland is clearly a country with a high tax rate. We have high rates of income tax (at relatively low levels of earnings), capital gains tax (with minimal annual exemption rates) and exit tax (although under review). Additionally, the compounding effect of gift and inheritance tax on previously earned income and gains is often overlooked. The threshold for passing wealth to children is far below the €525,000 it was 17 years ago, without taking account of inflation and value creation during that period.
We also have a small number of effective gift/inheritance tax reliefs and exemptions compared to other jurisdictions. However, with proper planning, clients can structure their affairs to ensure that loved ones qualify for these reliefs and exemptions, reducing some of the gift and inheritance tax burden. Without proper planning, the effective, compounded tax rate on wealth could be as high as 68 per cent.
The saying goes that hope is not a strategy, but you might be forgiven for hoping for further reform and simplification of our tax system. Recently we have heard talk of capital gains tax reduction, exit tax reform and gift and inheritance tax reform. The administrative burden of numerous proposed changes probably means that reform will not be a one-off and, more likely, phased across successive budgets. Our message to clients is to act now, seek advice and if the tax landscape improves then you are better placed to benefit.
Focal points
We regularly ask our clients questions around what they want to achieve with their hard-earned wealth:
- Can you afford to gift some assets now (and are you/they ready for it)? This can be done in a tax-efficient manner.
- Do your children need assistance, or can you “generation-skip” to grandchildren? This eliminates one layer of inheritance tax.
- Are you in the right type of investment and have you left it to the correct person in your will? For example, capital gains tax investments are treated very differently from exit tax investments on death and pensions’ role in estate planning is often underappreciated.
- Does the right person own the asset at the right time? This can be important for income tax (on an ongoing basis), capital gains tax and inheritance tax purposes.
- How liquid is your estate? Will inherited wealth create a tax liability loved ones will struggle to meet or be forced to sell at an inopportune moment?
- Should you enjoy more of your wealth rather than overly focusing on tax and succession planning? One of my colleagues coined the phrase, “Fly business class, because your son-in-law will.”
These spark conversations and can lead to solutions that make a real difference.
Next steps
Wealth planning requires in-depth analysis with qualified, experienced wealth management professionals but there are some things that each of us should be doing:
- Create a will: Without it, your control over the distribution of assets to loved ones is limited.
- Compile a concise list of your financial details: Accounts, locations, passwords and anything else that loved ones may find useful when you are no longer around.
- Speak with professionals: Ideally a wealth manager, tax adviser and solicitor can offer advice regarding how to best to arrange your affairs.
- Start now: The earlier you start, the better the potential outcome for your family.
- Take multiple meaningful steps: There is rarely one single silver bullet, but an overall tax burden can typically be reduced significantly with an effective plan.
Quilter Cheviot Europe provides wealth management services to clients across Ireland and the EU. We assist clients with personal, corporate, pension, charity, trust and assisted decision making-related accounts.
If any of the issues raised in this article are relevant to your own circumstances, please reach out to us at quiltercheviot.com.
This is a marketing communication, and is intended for financial advisers, other investment professionals and private investors. Value of investments and the income from them can go down as well as up, you may not get back what you invest. Quilter Cheviot Europe is regulated by the Central Bank of Ireland
