What is inheritance tax?
Inheritance tax is a tax which can arise when someone receives an inheritance as a result of someone dying. The beneficiary is responsible for paying the tax.
If you are a surviving spouse or surviving civil partner, the inheritance is completely exempt and, no matter how valuable, will not be liable for inheritance tax.
But for children, inheritance tax thresholds (the amount you can inherit tax-free) have been slashed in recent years.
They have fallen from €542,544 for a son or daughter in early 2009 to €225,000 today.
And the rate of capital acquisitions tax has risen from 20pc in 2008 to 33pc now.
This means that tax at the rate of 33pc applies on the excess over the tax-free threshold.
Smaller families can mean a small number of beneficiaries, which means that the inheritance is split fewer ways. This in turn leads to higher tax bills.
The obligation to make a return to Revenue Commissioners rests with the person who receives the inheritance.
Finance Minister Michael Noonan is to examine the issue which is forcing many to sell their parents' homes in order to settle with Revenue.
How we compare with other countries
In the US there is no tax due on the first $5.4m (€4.86m) of an inheritance, with the annual gift exclusion around €12,500.
The report by the OECD shows that the inheritance tax regime is much more liberal in most other western countries compared with Ireland.
In Britain, the exemption from the tax is set at £325,000 (€444,816). In Germany, the exemption on inheritances is €380,000, the OECD says.
