Inheritance Tax Life Assurance

how to use inheritance tax life insurance
We have one of the highest death taxes in the world.

Inheritance Tax.

It takes one third of what you intended to leave behind for your children and gives it to The Taxman unless you put a plan in place to avoid inheritance tax.

How does inheritance tax work?

When you die and leave an inheritance, the person receiving the inheritance might  have to pay tax on it.

If you are married or a civil partner, there is no inheritance tax regardless of the size of the inheritance.

But your children could be hit with a massive tax bill.

The first €225,000 your kids receive in their lifetime is tax-free.

Anything above €225,000 is taxed at 33%.

Example:

Let’s say you have one child who receives a house worth €600,000 and shares valued at €86,000.

This results in an inheritance tax bill of €152,000.

Your child doesn’t have access to €152,000 so has to sell the family home to pay the tax bill..

A home that could be in your family for generations.

I’m sure you’d want to avoid this scenario and you can with inheritance tax life assurance.

What is inheritance tax life assurance?

Inheritance tax life assurance is a special type of whole of  life insurance where the proceeds of any payout are tax-free if used to pay an inheritance tax bill.

It’s also known as Section 72 Life Insurance.

In the example above you could take out a Section 72 life insurance policy for €152,000. On your death your child would get your home and shares while the Revenue would get the proceeds of your life insurance to pay the inheritance tax bill.

How much inheritance tax life assurance do you need?

Here’s a handy inheritance tax liability calculator.

However if your personal situation is complex, you should take independent tax advice before proceeding with a S72 life insurance policy.

How much does a Section 72 Policy cost?

Like all life insurance policies, it depends on

  • your age,
  • health,
  • whether you smoke
  • and the amount of cover.

It’s underwritten in the same way as a normal life insurance policy.

Over to you…

Unfortunately we can’t quote online for inheritance tax life assurance but give me a call on 05793 20836 and I’d be happy to help. If you prefer email, just complete the short form below and I’ll be right back.

Further reading:

Children forced to sell family home as rising house prices push up tax bills

Families ‘should be allowed to pay death tax in stages’

Nick McGowan
LION.ie Life Insurance for Smart People

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