Wealth Management
Receiving an inheritance is often bittersweet, financial gain mixed with loss. If you’ve suddenly come into significant money, the best first step is to do nothing rushed. Park the funds safely, take time to grieve, and only then make considered decisions about how this money can best serve your future.
We see this situation regularly: someone inherits €100,000, €250,000, sometimes more. It might be from a parent, an aunt or uncle, or occasionally a spouse. And along with the money comes a weight of responsibility, what would they have wanted? Am I making the right choices? How do I not mess this up?
This guide covers the practical steps to take after inheriting money or assets in Ireland. We’ll look at the immediate actions, tax implications, and the decision framework for what to actually do with an inheritance once the initial shock has passed.
First Steps After Receiving an Inheritance
Here’s what not to do: make big financial decisions in the first few weeks. Whether it’s €50,000 or €500,000, that money isn’t going anywhere if you leave it in a safe place for a month or two while you process everything.
Park It Somewhere Safe
If you’ve received cash, put it in an instant-access savings account for now. You’re not trying to earn great returns at this stage, you’re just keeping it accessible while you think. Most Irish banks offer accounts paying 2-3% on instant access, which is perfectly adequate for money you might need to access quickly or move elsewhere soon.
If you’ve inherited property, there’s no rush to list it for sale. If it’s generating rental income, keep things ticking over as they were. If it’s vacant, make sure it’s secure and insured. Major property decisions can wait.
If you’ve inherited investments: shares, funds, or a portfolio, leave them as they are initially. Markets go up and down, but a month of sitting tight won’t make or break you. Resist the urge to immediately sell everything or make dramatic changes.
Gather the Documentation
You’ll need to understand what you’ve inherited and what taxes might apply. Key documents include:
Grant of probate or letters of administration
- The will (if there was one)
- Valuations of property and other assets
- Details of any Capital Acquisitions Tax (CAT) already paid by the estate
- Bank statements and investment account details
The executor or solicitor handling the estate should provide most of this. If you’re the executor yourself, you’ll already be dealing with it. Either way, get everything organised in one place.
What Tax Has Been Paid?
Sometimes CAT is paid from the estate before distribution. Sometimes it’s your responsibility as the beneficiary. And sometimes, if the inheritance is below the relevant threshold, there’s no CAT due at all.
Don’t assume everything is sorted just because you’ve received the money. Check with the solicitor or executor what tax position you’re in. If CAT is payable, you typically have four months from the date you receive the inheritance to file the return and pay the tax. Missing this deadline results in interest charges and potential penalties.
How Inheritance Tax (CAT) Works in Ireland
Capital Acquisitions Tax is the Irish tax on gifts and inheritances. The amount you pay depends on your relationship to the person who left you the money and how much you’ve received from that side of the family over your lifetime.
The Three CAT Thresholds
There are three groups, each with a different tax-free threshold:
Group A
€400,000 threshold
This applies to inheritances from parents to children (including adopted, step-children, and certain foster children). You can receive up to €400,000 over your lifetime from this category before paying any CAT.
Group B
€40,000 threshold
This covers inheritances from siblings, grandparents, nieces, nephews, and some other relatives. The threshold is much lower, just €40,000 tax-free over your lifetime.
Group C
€20,000 threshold
Everyone else falls into Group C, friends, distant relatives, non-blood relations. The tax-free amount is only €20,000.
How CAT Is Calculated
Above these thresholds, you pay CAT at 33% on the excess. The thresholds are lifetime limits, not per inheritance. If you previously received €200,000 from a parent and now inherit another €200,000, you’ve used €400,000 of your Group A threshold, exactly at the limit, so no CAT is due. But if you inherited €450,000 in total, you’d pay 33% CAT on €50,000 (€450,000 minus the €400,000 threshold), which works out at €16,500.
All previous gifts and inheritances from the same group count. If your parents gave you €50,000 towards a house deposit five years ago, that’s already eaten into your Group A threshold. This is why it’s called lifetime aggregation, everything adds up.
The Small Gift Exemption
There’s one useful exemption: the €3,000 small gift exemption. Anyone can give you up to €3,000 per year completely tax-free, and it doesn’t count towards your CAT thresholds. If five different relatives each gave you €3,000 in the same year, you’d receive €15,000 with no CAT implications. This is annual, you can’t carry it over, so use it or lose it.
Dwelling House Exemption
If you inherit a house that you’ve been living in, there’s a potential exemption from CAT entirely. To qualify, you must:
- Have lived in the house for the three years immediately before the inheritance
- Not own or have an interest in any other residential property
- Continue living in the house for six years after inheriting it
If you qualify, the entire value of the house is exempt from CAT. This is particularly valuable given property values in Ireland. But the conditions are strict. If you already own your own home, you won’t qualify. If you move out within six years, Revenue can claw back the exemption.
What to Do With Your Inheritance: A Decision Framework
Once the initial period has passed and you’re ready to make decisions, here’s a practical framework to work through. This applies whether you’ve inherited €50,000 or €500,000 – the principles are the same, just the scale differs.
Step 1: Clear Any High-Interest Debt
If you’re carrying credit card debt, personal loans at 8-10%, or any other expensive borrowing, pay it off. This is the single best guaranteed return you can get. Clearing a credit card balance at 18% interest is equivalent to earning 18% on an investment, and you’re not going to find that anywhere else with zero risk.
Your mortgage is different. We’ll come back to that in a moment. But credit cards, personal loans, car finance, if the interest rate is above 5-6%, pay them off.
Step 2: Build or Top Up Your Emergency Fund
Before you invest anything or make long-term commitments, make sure you have 3-6 months of essential expenses in an accessible savings account. If you already have some emergency savings, top it up to a comfortable level. If you have none, this is the priority.
This money stays in cash, a standard savings account paying whatever the going rate is. You’re not trying to earn great returns here. The purpose is liquidity and security. If your boiler packs in, if your car needs a new engine, if you lose your job, you have a buffer. That buffer means you won’t have to sell investments at the wrong time or go back into debt when life throws problems at you.
Step 3: Maximise Pension Contributions
This is where most people miss a massive opportunity. Pension contributions receive tax relief at your marginal rate. If you’re a higher-rate taxpayer, that’s 40% income tax relief plus 4% PRSI, so every €100 you put into a pension only costs you €56 out of your pocket.
You have age-related limits on how much you can contribute each year:
- Under 30: 15% of earnings
- Age 30-39: 20% of earnings
- Age 40-49: 25% of earnings
- Age 50-54: 30% of earnings
- Age 55-59: 35% of earnings
- Age 60+: 40% of earnings
These limits are based on your earnings, capped at €115,000 for the purposes of tax relief. If you earn €80,000 and you’re 45, you could contribute up to €20,000 (25%) and get full tax relief. If you haven’t been maximising contributions, using an inheritance to do so now makes enormous sense.
Yes, the money is locked away until retirement, typically age 60 for a personal pension. But if you’re in your 40s or 50s, retirement isn’t that far off. And the tax advantages are so significant that pension contributions should usually come before general investing, unless you’re already maxing them out.
Step 4: Consider Your Mortgage
Should you pay off some or all of your mortgage? It depends on your interest rate, your age, and your other financial priorities.
If your mortgage rate is above 4-5%, paying it down makes a lot of sense. You’re getting a guaranteed return equal to whatever interest rate you’re avoiding. If you’re paying 4.5% on your mortgage, every €10,000 you pay off saves you €450 a year in interest. That’s a guaranteed, risk-free return.
If your rate is lower, say you’re on a tracker mortgage at 2%, the case for overpayment is weaker. You might get better returns investing that money instead, particularly if you have a long time horizon.
There’s also the psychological element. Being mortgage-free is a powerful thing. Some people are happy to carry a cheap mortgage for years if it means building wealth elsewhere. Others can’t relax until the house is fully theirs. There’s no wrong answer, just be honest with yourself about what matters to you.
One warning: check if your mortgage has overpayment limits or break fees. Some mortgages allow you to overpay only a certain percentage per year without penalties. If you’re on a fixed rate and want to pay a large lump sum, there might be break fees that make it less attractive.
Step 5: Invest What’s Left
After debts are cleared, emergency fund is sorted, pension is topped up, and you’ve made a call on your mortgage, what remains can be invested for the future.
The right approach depends on your timeline:
Short-term
(0-3 years):
Keep it in cash. If you might need the money in the next few years – for a house deposit, a wedding, education costs, don’t invest it. Markets can drop 20-30% in a year, and you don’t want to be forced to sell at the wrong time. Savings accounts, term deposits, or state savings products are appropriate here.
Medium-term
(3-7 years):
A balanced mix of assets. Something like 40-60% equities, with the rest in bonds or safer assets. This gives you some growth potential while limiting how much you could lose in a bad year. Multi-asset funds are designed for this middle ground.
Long-term
(7+ years):
Growth assets like equities. Over long periods – ten years, twenty years – equities have consistently delivered better returns than bonds or cash. They’re also more volatile, but you have time to ride out the bumps. A globally diversified equity fund is a straightforward choice.
One point to keep in mind: investment funds in Ireland are taxed at 38% on growth (reduced from 41% in January 2026), with deemed disposal every eight years, even if you don’t sell. Direct shares are taxed at 33% CGT and have no deemed disposal. The tax treatment matters, especially over long periods, so factor it into your decision.
Common Mistakes to Avoid
We’ve seen enough inheritances over the years to know where things typically go wrong. Here are the mistakes to watch out for.
Making Rushed Decisions
The biggest mistake is acting too quickly. Within days of receiving money, people buy new cars, book expensive holidays, or commit to investments they don’t understand. A month later, they regret it.
There’s no rush. Park the money somewhere safe for a few weeks or months. Think about it properly. Talk to people you trust. Get financial advice if the sums are significant. But don’t make life-changing decisions in the immediate aftermath.
Lifestyle Inflation
Receiving a lump sum changes your spending behaviour, often without you noticing. A €100,000 inheritance can disappear surprisingly quickly if you’re not deliberate about it, upgrading the car, renovating the house, a few nice holidays, helping the kids with this and that.
There’s nothing wrong with enjoying some of it. But be intentional. Decide upfront how much you’ll spend now versus how much you’ll save for the future. Once you’ve made that split, stick to it.
Forgetting About Tax
If CAT is payable and you spend the money before sorting the tax, you’ll have a problem when the Revenue bill arrives. Know your CAT position before you start making plans. If you owe €20,000 in CAT, set that aside immediately, don’t spend it and hope you’ll find it later.
Leaving Everything in Cash Long-Term
Cash is appropriate initially and for short-term needs. But leaving a large inheritance sitting in a current account for years means it’s losing value to inflation. A €200,000 inheritance left in cash at 2% interest for ten years might grow to €240,000 nominally, but inflation at 2-3% per year means its purchasing power has barely changed, or even declined.
If you don’t need the money for years, invest it appropriately. You don’t have to take big risks, but you should put it to work.
Ignoring Professional Advice
For smaller inheritances, say under €50,000, you can probably handle things yourself with a bit of reading. For larger sums, particularly if you’re inheriting property, businesses, or complex assets, pay for proper advice. A financial adviser, tax adviser, or solicitor will cost you a few hundred or a few thousand euro. But getting it wrong can cost you tens of thousands.
Don’t take investment advice from your brother-in-law, or tax advice from someone down the pub. Use professionals who are qualified and regulated
Frequently Asked Questions
How much inheritance tax will I pay in Ireland?
It depends on your relationship to the deceased and how much you’ve inherited. Inheritances from parents to children have a tax-free threshold of €400,000 (Group A). Above that, you pay 33% on the excess. Inheritances from siblings, grandparents, or similar relations have a €40,000 threshold (Group B). All others have a €20,000 threshold (Group C). These are lifetime limits, previous gifts and inheritances from the same group count towards them.
Should I pay off my mortgage with an inheritance?
If your mortgage rate is 4-5% or higher, paying it down makes strong sense, you’re getting a guaranteed return equal to the interest you save. If your rate is lower, the decision is less clear-cut, and you might generate better long-term returns by investing instead. Also consider your age and how close you are to retirement. Many people value the peace of mind that comes with being mortgage-free, even if the pure maths might favour investing.
How should I invest inherited money?
Before investing, clear high-interest debt and ensure you have an emergency fund. Then maximise your pension contributions if you have headroom, the tax relief makes this the single best use of surplus cash for most people. After that, invest based on your timeline: cash for short-term needs (0-3 years), balanced funds for medium-term (3-7 years), and growth assets like equities for long-term (7+ years). The right choice depends on when you’ll need the money and your tolerance for risk.
Do I need to tell anyone about my inheritance?
You don’t need to tell friends or family – that’s entirely your business. But if CAT is payable, you must file a return with Revenue within four months of receiving the inheritance. Even if no tax is due (because you’re below the threshold), it’s good practice to file a return anyway, it creates a clear record. If you’re claiming social welfare, an inheritance may affect your eligibility, so notify the Department of Social Protection.
What if I inherit property I don't want to keep?
You can sell it, but don’t rush. Take time to get a proper valuation, understand any Capital Gains Tax implications (though usually there’s no CGT on inherited property if you sell soon after inheriting), and market it properly. If it were your parents’ home, there may be emotional weight to the decision, give yourself permission to take a few months before listing. If there are multiple beneficiaries, agree on a plan together before acting.
Can I refuse an inheritance?
Yes. You can disclaim an inheritance within a reasonable time after becoming aware of it. This might make sense if accepting it would push you over a CAT threshold and create a large tax bill, or if you simply don’t want it. A disclaimer must be in writing, unconditional, and made before you’ve accepted any benefit from the inheritance. Once you disclaim, the inheritance is treated as if you never received it – it typically goes to the next beneficiary in line under the will or intestacy rules.
How long does probate take in Ireland?
Probate in Ireland typically takes 6-12 months, though it can be quicker for simple estates or longer if there are complications. The executor applies to the Probate Office, gathers all assets and liabilities, pays any debts and taxes, and then distributes to beneficiaries. You won’t receive your inheritance until probate is complete. If you’re the executor, expect it to take most of a year. If someone else is handling it, be patient, these things take time.
Should I keep inherited investments or sell them?
Don’t make snap decisions. First, understand what you’ve inherited, are these individual shares, funds, a diversified portfolio? Are they performing well? What are the costs? If you’ve inherited a well-constructed, low-cost portfolio, there may be no reason to change anything. If you’ve inherited a few random shares that don’t fit your risk profile or goals, selling and reinvesting in something more suitable might make sense. Get advice, a financial adviser can review inherited investments and recommend whether to hold or switch.
Get Started
Inheriting money or assets is a significant event, financially and emotionally. Taking the time to make considered decisions, understanding your tax position, and putting the money to work in ways that support your long-term goals will ensure that the inheritance serves its proper purpose: giving you financial security and options you might not have had otherwise.
At Rockwell Financial, we regularly advise clients who’ve received inheritances. We can help you understand your options, manage tax efficiently, and build a plan that makes sense for your circumstances. We’re Central Bank regulated (C117291) and our advice covers investments, pensions, and financial planning.
If you’d like to discuss your situation, book a consultation or call us on +353 1 526 7433.
