CAT Planning – Dwelling House Exemption


Inheritance tax (CAT) is no longer a concern of only the very wealthy. With a 33% CAT rate and a parent/child threshold of €280,000, many people are rightly concerned about the tax cost that their family will face in the event of their death.

In any Estate Planning exercise, after making maximum use of the CAT thresholds and annual gift exemptions, the next step is to review whether there are opportunities to avail of other CAT reliefs.

Unfortunately, there are very few CAT reliefs left, the main ones being Business Property Relief, Agricultural Relief and the Dwelling House Exemption. It is worth remembering that even though an estate may not contain any agricultural property or any business assets, there still can be scope to avail of these reliefs depending on circumstances.

As one of the last remaining CAT reliefs available, it is vital to consider the Dwelling House Exemption. This is a valuable relief as there is no cap on the value of the property that can be passed.

There are a number of conditions attaching to Dwelling House Exemption, the key ones being the 3 year residency requirement and the property ownership test. The relief is drafted in such a way that the beneficiary cannot have an interest in another dwelling at the time of taking the gift of the house. Also, following receipt of the gift, to avoid a clawback the beneficiary would need to continue to occupy the house as their main residence for 6 years (although it is possible to replace the original dwelling once certain conditions are met).

If you would like to discuss this relief or any other tax planning opportunities, please contact Declan O’Luanaigh.