You have the choice to designate who you wish to receive your assets, such as your property, savings, or personal items when you die. If you decide to leave these to anyone other than your spouse or civil partner, the amount of the estate beyond a certain exemption level may be subject to an inheritance tax at the rate of 33%. The tax bill awaiting your beneficiary could be substantial, presenting a financial challenge that might be difficult to meet.
For example, if Marta passes away and bequeaths her family home, valued at €600,000, to her son, David, he would face an inheritance tax bill of €66,000. Such a significant amount could pose a considerable financial challenge for David to meet.
With a short time frame to pay this tax bill, there may be no other option but to sell the family home to meet this bill. Having a Section 72 life insurance policy can prevent your loved ones from having to sell the family home or secure a loan for tax payments, effectively easing the financial strain of inheritance tax.
A Section 72 policy is a unique insurance plan authorised by the Revenue Commissioners in accordance with the Capital Acquisitions Tax Consolidation Act of 2003, Section 72. Usually, parents purchase this policy to protect their children from inheritance taxes. It works similarly to a traditional life insurance policy, where premiums are paid, and beneficiaries get a tax-free lump sum payment upon the policyholder’s passing.
Note that a Section 72 life insurance policy is designed to directly address and pay off inheritance tax liabilities arising at the policyholder’s passing. It’s crucial that the individual planning to leave an inheritance is the one to set up and pay for the Section 72 policy.
Proceeds from a Section 72 policy that exceed the inheritance tax liability will form part of the estate. You can choose which beneficiary will benefit from the Section 72 policy, and this can be amended as time goes on.
Capital Acquisitions Tax, commonly referred to as the gift and inheritance tax, applies to all gifts and inheritances received. Individuals are permitted to accept a specified amount of gifts and inheritances throughout their lifetime without triggering this tax. Should the cumulative value received surpass this lifetime exemption limit, the tax is then imposed at a standing rate of 33% (as of October 24 – Budget 2025).
* CAT only applies to amounts over the relevant group threshold. CAT is charged at 33% on gifts and inheritances.
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In an example, Jane has a house worth €300,000 and intends to leave the house to her two granddaughters. Transferring the property in its entirety would result in a CAT liability of €40,000 each, totalling €80,000 for both granddaughters, meaning that they would have to pay over €72,600 in Capital Gain Taxes. To address this, Jane decided to take on a Section 72 policy. When the time comes for her granddaughters to inherit the house, the policy will kick off and be used to to pay any Capital Gains Tax due.
Please note that the foregoing scenario is provided only for illustrative purposes and should not be considered financial advice. Every individual’s financial situation is unique, so we highly recommend that you consult with one of our experienced financial advisors, who can offer tailored guidance and strategies that align with your specific circumstances.
Ensure your loved ones don’t face financial hardship due to inheritance tax—contact us today to learn how a Section 72 policy can protect your estate.
Tax Efficiency: The primary benefit is its ability to pay out a sum specifically intended to cover tax liabilities, thereby not reducing the estate’s worth due to taxes.
Estate Preservation: By covering inheritance tax, the policy ensures that valuable family assets do not need to be liquidated to pay taxes, preserving the estate for future generations.
Flexibility and Peace of Mind: Policyholders can adjust their coverage to match their anticipated future tax liabilities, offering a flexible approach to estate planning.
The amount of coverage you need depends on several factors, including:
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The cost of Section 72 life insurance differs for each individual because everyone’s circumstances are unique.
Key factors influencing the price include your age, smoking status, health conditions, and the coverage you require. Essentially, the larger the inheritance you need to protect, the more coverage you’ll need, which leads to higher premiums.
If you’re looking to purchase Section 72 Insurance in Ireland, there are several reliable options available to you. Notably, three major insurers—Zurich Life, Irish Life, and Royal London—offer comprehensive plans tailored to this type.
How to Get the Best Deal:
We work to get you the best product for your unique requirements. Get a quote on our website or book a FREE appointment, and one of our advisors will be happy to assist you in getting you the best option.
By exploring these avenues, you can make an informed decision and secure the best coverage.
This policy is ideal for individuals who anticipate their estate will be subject to significant inheritance tax and who wish to protect their beneficiaries from the financial burden of those taxes.
While both policies pay out upon the policyholder’s death, a Section 72 policy is specifically intended to cover inheritance tax. The payout from Section 72 is not subject to inheritance tax, provided it’s used to settle the tax bill.
The payout is tax-free when used directly to pay inheritance tax liabilities. If used for other purposes, it may be subject to tax.
When it comes to applying for Section 72 coverage, there is indeed an age limit to be aware of. The maximum age at which you can begin the application process is 74 years old. This means that eligibility to initiate new coverage ceases once you reach your 75th birthday.
It’s important to plan accordingly if you are nearing this age threshold. Applying before this cutoff ensures you can secure the coverage designed to meet your needs.
If you’re past the age of 74, unfortunately, Section 72 coverage will no longer be available to you. It’s advisable to explore alternative financial planning options that accommodate your current age and circumstances.
Yes, children can contribute towards a Section 72 Life Assurance Plan. This is possible through strategies such as utilizing the small gift exemption.
How the Small Gift Exemption Works
By using these allowances, children and family members can effectively help in paying for a Section 72 Life Assurance Plan while minimizing their tax liability. Always consult with a financial advisor to navigate these options in compliance with current regulations.
At True Wealth, we believe that smart financial planning and strategic tax advice go hand in hand. That’s why we’ve partnered with Brown & Lombard — one of Ireland’s leading independent tax advisory firms — to offer our clients the best of both worlds.
This partnership provides you with access to expert tax insights tailored to your personal and business objectives. Whether you’re a business owner planning for succession, a company director navigating compliance, or simply someone looking to maximise your wealth, our collaboration ensures you receive a comprehensive strategy built for growth and efficiency.
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