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Inheritance tax planning how to lessen the burden




Can you reduce your liability with effective inheritance tax planning?


The short answer is probably “yes”....... with Section 72 Life Cover.

A popular financial product for inheritance tax planning is a Section 72 Life Cover policy (under Section 72 of CAT Consolidation Act 2003) that, when used to pay an inheritance tax bill, is not treated as part of your estate. With the current thresholds for surviving children at record lows this piece of inheritance tax planning can provide you with a major “tax-saving.” Let’s look at a simple example of what would happen to an estate on death.

Married Couple aged 67 (non-smokers)

Two adult children over age 21.

Value of Assets

Residential Home

€ 450,000

Investment Property

€ 175,000

Other Assets

€ 50,000

Total Assets

€ 675,000

Less Tax-Free Threshold (€280,000.00 per child)

€ 560,000

Taxable Surplus

€ 115,000

Tax Due on Surplus (€115,000.00 x 33%)

€ 37,950

(If you like, click here to see a handy calculator from Zurich Life that will allow you work out your own Inheritance Tax Liability. – Give us a call for a FREE Quote.)

In the example above, the two children would need to find €37,950.00 to pay the Revenue before gaining access to their parent’s estate. 

With a little advance inheritance tax planning to help meet this liability, the parents can put in place a Section 72 Life Cover policy that will pay out on the last death (the second life) and this is for the sum of the tax liability, €37,950.00. The cost, in this example, is approx €85 per month.

The average mortality rates currently are 79 for males and 83 for females. In the event that the second, surviving partner died in, say, year 20 (Aged 87), the policy would pay out the  €37,950.00 to meet the tax bill. The cost would have been less than €20,000 over the twenty years; a saving of about €18,000!! 

Probably more important is the fact that the children had instant access to the life cover to pay the Inheritance Tax bill. 

Premiums for a Section 72 Life Cover plan can be paid by either the parents or the children.

Give us a call if you think that this is something you should look into – we’re here to help you!

Steadfast Financial
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