Section 72

Safeguarding Your Legacy: Unveiling The Power of Section 72 Insurance.

Section 72 insurance whole of life cover benefits

In the realm of financial planning, ensuring the smooth transfer of wealth to loved ones is paramount. For couples like John and Mary, aged 54, the prospect of leaving behind a substantial estate raises important questions about taxation and inheritance. Without proper planning, their beneficiaries could face a hefty tax bill, potentially jeopardising the legacy they wish to leave behind. Let’s explore how Section 72 insurance serves as a vital tool in mitigating this risk and securing their family’s future.

Does Starting a Whole of Life Section 72 Insurance Policy Make Financial Sense?

Initiating a Whole of Life Section 72 insurance policy for estate planning purposes requires a thorough examination of various factors, including tax implications, inflation considerations, and the inherent uncertainty in calculating inheritance taxes. While the numbers provide a framework for decision-making, it’s advisable to consult with a financial advisor to assess the suitability of such a policy based on individual circumstances and long-term financial goals.

Inheritance Tax Changes in Budget 2023

This is something that we are meant to be grateful for from Budget 2023. Despite the continued rising in property values, where the family home will usually be the largest part of an individual’s estate, there has been no increase in the threshold where you can pass assets to your children without them having any CGT liability. So, you can give your children up to €335,000 each in their lifetime before they would have to pay tax at a rate of 33%. Unless the estate also includes a generous portion of liquid or cash assets, the family home will have to be sold to meet with the tax demand.

Mixed, opposing opinions for Inheritance Tax review.

It seems that whilst the Commission on Taxation & Welfare recommends a dramatic reduction in the already reduced individual threshold at which someone can inherit assets without having to pay inheritance tax, politicians aren’t champing at the bit to implement it.

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%.

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.

What’s the difference?!

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. Life insurance refers to a product that will payout a lump sum benefit if you die during the term of your policy. An example of this would be your mortgage protection policy. If you die during the policy term, the insurance company will pay out enough money to clear the outstanding balance of your mortgage. If you do not die during the policy term, your policy will end and you will receive nothing.

Specific CAT queries.

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. Whether you are planning for your own estate or you are expecting to receive an inheritance or large gift, the best person to speak with is a suitably up to date accountant or estate planner. They will (should) be up to speed on what legal approaches you an take to minimise any CAT you or your beneficiaries will have to pay.

What is C.A.T.?

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.

Preparation is key…

It’s fantastic to make a will. Like I mentioned before, it brings clarity to a frequently challenging and fraught time for others. It can also save a considerable amount of time and administration when dealing with the estate of a deceased person.