Section 72 policy Ireland is often hailed as a valuable tool for estate planning. Formally known as Section 60 insurance in Ireland, Section 72 is an approved, whole-of-life policy, the proceeds of which are tax-free if used to pay an inheritance tax bill.
A section 72 policy Ireland gives you the opportunity to plan for the payment of inheritance tax in Ireland efficiently and in advance. Specifically enacted with the sole purpose of paying Capital Acquisition Tax (CAT), they are considered the cornerstone of estate planning.
Section 72 life insurance policy allows people to avoid incurring potentially life changing and usually unexpected tax demands upon the inheritance of a property or asset. As per Irish Law, the beneficiary of the estate is liable to pay the taxes – and not the disponer.
Maybe you’ve heard of a friend or relative who inherited a property upon the death of their parents, only to be issued with a hefty Capital Acquisitions Tax (CAT) bill. But often, what happens is that people who inherit a property are ultimately forced to sell the property just to cover up the insurance tax bill. This not only affects emotionally but also financially.
Unfortunately, many people who can benefit from Section 72 policy Ireland don’t even know about its existence. Therefore, we have taken this opportunity to help you understand Section 72 Policy Ireland with all the required details.
How Does Section 72 Policy Ireland Work?
Let’s understand the workings of Section 72 policy with an example:
Assume you are a parent who owns a property with a value of €500,000. Naturally, your child will inherit it from you. As time comes, and the ownership of the property passes over to your child (beneficiary) they have to pay Capital Gains Tax (CGT) over the individual threshold of €335,000. The current CCT rate is 33%.
So if we calculate and deduct the €335,000 individual threshold – this leaves you with €165,000 taxable at 33%. This means that the beneficiary of the inheritance (your child here) has to pay a staggering tax bill of €54,450. And this is just taking into account the family home.
Requirements For Getting A Section 72 Policy Ireland
The policyholder must be the person leaving behind the inheritance. As a child cannot insure the life of a parent, they will have to prove to the insurer that they need the Section 72 policy – which can easily be done by showing a copy of the will or proof of assets.
In situations where estates pass over from one spouse to another, or maybe between civil partners, a joint policy is always recommended because, on the death of the second spouse, the beneficiaries of the inheritance will be guarded by the Section 72 policy. This is also known as joint life, second death. This will ensure that the second spouse can have Inheritance tax relief on the transfer of assets from one spouse to another following death.
Why Should I Take Section 72 Policy Ireland?
To put it in simple words, Section 72 Policy Ireland can help you save a lot of money and potential headaches. Imagine how your children would feel if they had to sell their childhood home, on a short note, just to settle a tax bill. And Section 72 policy counters the need for this.
If you are about to receive a large inheritance, this policy can be highly beneficial. A smart, quick way to plan the future of your beneficiaries is by taking a few simple steps today.
For parents, they should consider this policy with their children in mind. Children in their 30s and up must consider Section 72 life insurance policy for their future.
With the whopping increase in property prices in Ireland, more and more people are resorting to smart and sensible financial and estate planning. Curate an actionable financial and retirement plan with the help of expert financial advisors from Money Maximising Advisors Limited. Hope it helps!
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