Many individual investors hold their investments (outside of their pensions) in life assurance products called ‘Gross roll-up funds’ as opposed to holding the individual shares directly. The benefit of the investment in a fund has many advantages such as allowing investment growth without immediate taxation, administrative convenience etc.
However, there are certain individuals particularly with large investments where an investment in certain ‘Gross roll-up funds’ may be the wrong option, particularly on death.
What are the tax implications of death on investments you hold in a fund?
Upon death, the investment’s growth in a fund is typically subject to exit tax at a rate of 41% although this is allowed as a credit against any inheritance tax (CAT) liability arising.
How is this different from investing in individual shares directly?
NO Irish exit or Capital Gains Tax arises on death by investing in individual equities.
Are both investment structures liable to CAT?
YES. The investment value under both approaches is included in the deceased’s estate for inheritance tax (CAT) purposes.
Are there any planning tips on how my Will should be structured?
YES: Most married couples usually provide in their Will that investment assets held in certain fund structures pass to the surviving spouse as no inheritance tax CAT arises.
However by leaving such assets to your children or grandchildren, rather than a spouse can mean that maximum tax relief may be claimed as generally the 41% taxes paid can be offset against their Irish CAT liability (subject to proper planning). If left to a spouse, no credit applies.
Key Takeaway: Investors should seek professional advice to address the impact of death on their gross roll-up fund investments, ensuring tax-efficient wealth transfer to their families.
