Can the beneficiary of the estate, the person who will pay the tax bill, be the plan owner / proposer on the Section 72 contract?

No. For relief under Section 72 CAT Consolidation Act to apply the person leaving the assets must be the plan owner, must be the life assured and must pay the premiums on the qualifying plan. If the person who is going to be paying the tax bill, the beneficiary, wants to pay the premiums on the plan themselves then that is simply just a ‘life of another’ contract with the beneficiary as the plan owner, and the payer of premiums and the ‘disponer’ or the person who is leaving the assets, as the life assured. The insurable interest is the fact that the beneficiary will have a tax liability to pay on the death of the life assured.

 

Can the beneficiary of the estate pay the premium on the policy for example a son pays the premiums on his parents Section 72 plan?

No. In line with Revenue Guidance Notes for eligibility for Section 72 relief, the life assured , the payer of the premiums and the person leaving assets must be the same person. However, if the person who is going to be paying the tax bill, the beneficiary, wants to pay the premiums on the plan themselves, then that is simply just a ‘life of another’ contract with the beneficiary as the plan owner, and the payer of premiums and the ‘disponer’ or the person who is leaving the assets, as the life assured. The insurable interest is the fact that the beneficiary will have a tax liability to pay on the death of the life assured.

 

Can an existing plan be amended to be eligible for relief from Inheritance Tax?

No. The plan has to be taken out specifically from day 1 as a ‘special’ plan to pay inheritance tax. What the Revenue Guidance Notes state is that the plan has to be taken out expressly to pay Inheritance Tax.

 

What happens if the Inheritance Tax bill is LESS than the level of cover under the plan? The amount of the sum assured actually used to pay inheritance tax is exempt from inheritance tax. Any proceeds not used to pay inheritance tax (excess sum assured over inheritance tax bill) are a taxable inheritance.

 

Can an unmarried couple who are living together effect a joint life Section 72 plan?

No. Only legal spouses or registered civil partners can effect a joint life Section 72 plan. Where a non-married couple wish to use Section 72 relief they will have to effect two separate single life plans.

 

Can a term assurance plan be used to avail of this relief?

Technically yes, you can but Irish Life’s approved plan is a guaranteed whole of life arrangement. Please note however, that if a term assurance plan is effected with another company for the purpose of using Section 72 relief the term of the plan must be at least 8 years.

 

What happens if the person dies before the 8 years is up?

The relief will NOT be lost as long as the plan was set up for a term of at least 8 years from the outset.

 

Can the sum assured be reduced?

Yes. Where the plan terms and conditions allow it yes the sum assured can be reduced BUT the life cover must never be lower than 8 times the annual premium, or 6 times the annual premium where there is a loading on the contract.

 

Can the premium be reduced?

Yes. Again, where the plan terms and conditions allow it, the premium on a ‘qualifying’ plan can be reduced. However, if the premium doubles or halves in any eight year period this COULD result in the plan losing its’ eligibility for relief if this change is not as a result of a change to the sum assured or as a result of a policy review on a unit linked case. So on the current Irish Life GUARANTEED plan, because any changes to the premium will ALWAYS result in a change to the sum assured, the plan will NOT lose it’s eligibility for relief as a result of a premium change …..just remember though the sum assured must always be at least 8 or 6 times the annual premium ( see previous question) .

 

Can the premiums re-start if a premium is missed and the contract lapses?

No. If a premium is missed and this causes the contract to lapse this means the contract has lost it’s eligibility for relief. Premiums can re-start to continue the life cover, but the plan will no longer be eligible for relief from Inheritance Tax.

 

If the plan is cancelled will it still be eligible for relief under Section 72 if the premiums re-start?

No. If the plan is cancelled this means the contract has lost it’s eligibility for relief. Premiums can re-start to continue the life cover, if this option is available under the policy conditions, but the plan will no longer be eligible for relief from Inheritance Tax.

 

Can the plan be assigned?

No. If the plan is issued in trust it cannot be assigned. If it has not been issued in trust any assignment over the plan would result in the plan losing its eligibility for relief.