The Blog

Changes To Inheritance Tax for Budget 2022

In a nutshell, everything remains the same. Following the release of Budget 2022, the 3 main thresholds remain as they were, as does the rate of tax payable on any amounts inherited in excess of the thresholds. The rate of tax payable stays at 33%.

Full details of Budget 2022 can be found here;

https://www.gov.ie/en/publication/2c63a-your-guide-to-budget-2022/

Given the rapidly rising values in many asset classes – property etc., one could be forgiven for hoping that there would be an increase in the tax free thresholds to allow for at least passing your estate on to your children – even if they were brought back to the higher amounts from some years ago, but unfortunately, they have stayed the same. It would seem like an easy target for the Government – Look relatively generous by not reducing the thresholds and not increasing the rate of tax payable, but no doubt given the rise in property values in particular, this could prove to be quite the windfall for the powers that be.

So, has the need for a Section 72 insurance policy become even more important? If this is something that you would like to explore, please feel free to request a quote for your own section 72 policy here – Request a quote.

The rate of tax payable on your inheritance stays at 33%. Is your estate liquid enough to cope with this payment?

Food for thought!

The two main things that you can gain from organising a Section 72 insurance policy are;

  1. The funds will exist for your beneficiaries to be able to settle the tax bill. No assets will need to be sold.
  2. More often than not, it is impossible to ‘lose’ financially on a policy. E.g. More is guaranteed to be paid out than you could possibly pay in premiums. This does depend on what age you are when effecting your policy.

A Section 72 policy is worth exploring, so if you would like to have a chat about the benefits, the cost and the downsides, phone Brian Whelan on 01 668 6136 or contact us here.

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Are the premiums worth it?

A Section 72 insurance policy is basically a guaranteed, whole of life insurance policy, but written with very specific instructions so that the Revenue Commissioners know not to include the proceeds of the policy as part of the life assured’s estate for inheritance tax purposes.

Guaranteed benefit pay out.

A guaranteed whole of life insurance policy is GUARANTEED to pay out the benefit no matter what age the person covered dies at. This means that it can be quite expensive.

Sometimes people ‘win’ with this arrangement, sometimes the insurance company ‘wins’. So, how can you put yourself in the position of winning?

A win is when you get more from the policy than the amount that you have paid in as premiums over the years of holding the policy. Below is a recent example of a quote that we provided for a client, and this one is clearly a win, in that the person would only lose on their Section 72 policy if they die after the age of 125!

Male / Non-smoker / Aged 55 & Female / Non-smoker / Age 53. Covered by a joint life, second death policy for €180k inheritance tax cover = €214.75 per month. This equates to €2,577 per annum, which means it would take them almost 70 years to reach the benefit amount of €180,000. In reality, as the premiums stop at age 100 (or on the second death, whichever happens first), they will pay a maximum of €115,965 in premiums up to age 100 for a guaranteed pay out of €180,000 from their Section 72 policy.

In this instance, and many others, the premiums are worth it.

The biggest issue with Section 72 policies or the issue that causes the most reluctance to start a Section 72 policy, is the commitment of the premiums at a stage of life when new income may be minimal. Bear in mind that in order for the policy to pay out, premiums must be maintained. So, at age 80, you will still need to be able to pay your premium every month.

As with everything in life, a balanced approach is key. Do you need to cover the entire inheritance tax bill? If your estate includes cash, could this not be used to cover part of the inheritance tax bill? As your children will ultimately benefit from the policy, should they pay the premiums, or at least contribute towards their cost?

Contact us to have a chat about how best to structure your Section 72 insurance policy in a balanced and reasonable way, that will ensure you are not over-committing to something that you may not be able to maintain in the long term.

If you have any specific questions, we are always available to help you out.

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What’s the difference?!

Is it life insurance or life assurance?

So, do you have a life insurance or a life assurance policy? Strictly speaking, you could have either. Each one is correct, but they are different things.

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Specific CAT queries.

Who do I contact with a specific CAT query?

The area of inheritances and gifts and the taxes that are applied to them is similar to all Revenue taxes… a minefield of “unless you are a…”. There are however experts you can contact with any CAT query you have.

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What is C.A.T.?

What is Capital Acquisitions Tax?

Capital Acquisitions Tax (CAT for short) consists of 2 separate taxes – Inheritance Tax and Gift Tax. Both involve the transfer of ownership of any asset, property or cash from one person to another. Inheritance tax applies when someone receives assets or property (the beneficiary) on the death of the person who has transferred the assets (the disponer) to them. Gift tax applies when someone receives money or any asset from a living person.

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Organising life insurance during a Pandemic.

Can you organise life insurance during this Pandemic?

Much like writing a will, setting up a life assurance policy can make us feel like we are begging for something to happen to us. This is unlikely to be the case! Many people have been staying at home to help limit the spread of Covid 19, not just for the sake of their own family, but for the wider community. Being with our families for such prolonged periods of time can invoke a multitude of reactions, but for the most part, it’s all good feelings!

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