Do you know there is a Life Assurance Policy Designed Specifically to Cover your Inheritance Tax Bill?

Introduction:

When it comes to financial planning, life assurance policies play a crucial role in protecting your loved ones' financial security in the event of your passing. Among the various types of life assurance policies, Section 72 life assurance policies stand out for their unique features and benefits. In this article, we will delve into the details of Section 72 life assurance policies, highlighting their advantages and shedding light on their implications.

What are Section 72 Life Assurance Policies?

Section 72 refers to a specific section of the Irish Capital Acquisitions Tax (CAT) legislation. In simple terms, a Section 72 life assurance policy is a type of life assurance policy designed to provide a lump sum payment upon the death of the policyholder. These policies are typically used to help cover any potential inheritance tax liability that may arise for the beneficiaries.

Benefits of Section 72 Life Assurance Policies:

The primary benefit is Estate Planning: Section 72 policies are commonly used as a strategic tool for effective estate planning. By incorporating a Section 72 policy, you can ensure that your beneficiaries receive a tax-free lump sum that can be used to settle any inheritance tax liability on your estate. This allows you to protect your family's financial well-being and preserve your hard-earned assets.

Tax Efficiency: Section 72 life assurance policies offer tax advantages that make them an attractive option for individuals concerned about minimising their inheritance tax liability. The pay-out from these policies is not subject to income tax, capital gains tax, or CAT. By carefully structuring the policy, you can ensure that your loved ones receive the maximum benefit while minimising the tax burden.

Flexibility: Section 72 policies provide flexibility in terms of the beneficiary designation. You can choose multiple beneficiaries or assign the policy to a trust to ensure that the proceeds are distributed according to your wishes. This flexibility allows for efficient wealth transfer and can help mitigate potential disputes among beneficiaries.

Royal London also offer a ‘Life Changes Option’ which offers 70% of your premiums paid back after 15 years or an option to continue a smaller amount of cover and pay no further premiums.

Implications of Section 72 Life Assurance Policies:

Premiums: The premiums for Section 72 life assurance policies can be higher compared to traditional life insurance policies. This is typically because they are ‘Whole of Life’ policies so there ‘will be’ a pay-out rather than ‘may be’ a pay-out. ?The cost is influenced by factors such as the policyholder's age, health, and the desired level of coverage. It's crucial to consider your financial situation and affordability before committing to a Section 72 policy.

Complexities: Section 72 policies involve complex tax planning and legal considerations. It's recommended to seek advice from a qualified financial advisor such as ourselves in Orca Financial Ltd and/or your tax professional to ensure you fully understand the implications and structure the policy to align with your specific needs and objectives.

Conclusion:

Section 72 life assurance policies provide a valuable tool for individuals seeking to protect their loved ones from inheritance tax liabilities while maximising the benefits of their estate. By understanding the benefits and implications of these policies, you can make informed decisions that align with your financial goals and aspirations. Remember to consult with professionals to ensure you navigate the complexities of Section 72 policies effectively and tailor them to your specific circumstances.

Orca Financial ltd can provide you with a Personalised Inheritance Tax Report by contact us on [email protected]