Estate Planning in Retirement: A Guide for Families

At some point, retirement planning stops being just about building wealth. Instead, many people begin asking a different question:

How can I help my children and grandchildren without affecting my own financial security?

Maybe you'd like to help with a first-home deposit. Perhaps you want to support a grandchild's future. Or maybe you simply want to make sure your assets pass to your family in the way you intended.

That's what estate planning is really about. And before making any decisions, one principle comes first:

Your own financial security should never be compromised.

Many people treat retirement planning and estate planning as separate conversations.

In reality, they're closely connected.

Before giving money away, it's important to understand:

• How much income you'll need in retirement
• How long your retirement may last
• The role your pension will play
• What assets you may ultimately wish to pass on

The first question isn't:

"How much can I give away?"

It's:

"How much can I afford to give away while still protecting my own future?"

A financial broker can help you understand that balance.

Today, many families are choosing to transfer wealth earlier rather than waiting until death.

Support may be most valuable when it helps someone:

•  Buy their first home
• Fund education costs
• Cover childcare expenses
• Start a business
• Build long-term financial security  

For many parents and grandparents, seeing the impact of that support during their lifetime is every bit as rewarding as leaving an inheritance later.

One of the simplest ways to transfer wealth is through the Small Gift Exemption.

Under current rules, an individual can generally gift up to €3,000 per year to another person without affecting that person's lifetime Capital Acquisitions Tax (CAT) threshold^1,2. A couple could potentially gift €6,000 per year to a child or grandchild.

This can be a practical way to support family members gradually over time.

For some families, it's not just about gifting money. It's about giving that money the opportunity to grow.

Imagine a grandparent has €10,000 sitting in a deposit account earning little interest. Rather than leaving it in cash, they may decide to invest it for a grandchild's future.

One option that may be considered is a Children's Investment Trust.

According to Aviva's Children's Investment Trust structure:

• Lump sums can be invested from €10,000.
• The investment is held for the benefit of the child until age 18.
• Investment growth is not treated as an additional gift for Capital Acquisitions Tax purposes.    

A simple example

A grandparent invests €10,000 for a grandchild.

Over time, the investment grows to €15,000. The additional €5,000 of growth is generally not treated as a separate gift from the grandparent.³

This is one reason some families explore gifting earlier rather than later.

As with any investment, the value can go down as well as up and professional financial, tax and legal advice should always be sought.

Your pension may be one of the largest assets you own. Questions worth considering include:

• What happens to my pension when I die?
• What happens to my ARF?
• How do pension assets fit into my estate plan?
• What happens to any remaining value?

In some circumstances, an ARF can offer greater flexibility from an estate-planning perspective than an annuity.  This is because any remaining value may potentially pass to beneficiaries, subject to the rules and taxes that apply at the time.

That doesn't automatically make an ARF the right choice.

Retirement income decisions should first be based on your own needs, objectives and income requirements.

However, estate-planning considerations are often part of the conversation.

• Do I have an up-to-date will?
• Have I discussed my wishes with my family?
• Could lifetime gifting make sense for my circumstances?
• Do I understand any potential tax implications?
• Have I spoken to a financial broker, solicitor or tax adviser?

Estate planning isn't really about tax.  It's about helping the people you care about, while making sure your own future remains secure. The best estate plans aren't necessarily the most complex. They're the ones that help the right people, at the right time, in the right way.