CAT is charged to the person receiving the benefit. It is calculated on the value of the benefit less any liabilities or costs paid by the beneficiary at a rate of 25%; therefore, transferring an asset while values are low will automatically trigger a reduced tax liability. Given the current difficult trading conditions the younger generation may benefit from having the asset sooner rather than later to generate an income or to help finance a new venture.

Depending on what assets are being transferred, the transaction may qualify for an exemption or relief from CAT. Under current Revenue legislation each individual has three lifetime class thresholds for CAT, dependent on their relationship with the donor. Where the benefit does not exceed the threshold, no CAT is charged. For example, children of a donor have a lifetime threshold of €414,799; to that end they can receive gifts or inheritances from their parents not exceeding €414,799 during their lifetime tax free. Also a parent can transfer a site with a market value of less than €500,000 to enable the child to build a principal private residence without triggering CAT.

Agricultural Relief, applicable to agricultural land and buildings, can reduce a CAT charge by 90%. A similar relief from CAT is available on the transfer of a business. The transfer of a dwelling house may be totally exempt from CAT provided that both the donor and the donee satisfy certain conditions.

While availing of the decreased values to reduce CAT will profit the beneficiaries, it is worthwhile noting that once the asset is transferred to them it is gone from your portfolio. Therefore, it is vital to assess your own cash flow for the future in order to protect your income in years to come. You could retain a life interest in the asset to ensure your future income and financial security is not jeopardised.

Passing on wealth is a complex issue and should not be driven solely by tax. The main concern is that the final result will service the overall needs of the family in the future.