Previously, I discussed inheritance tax and the complications that may arise as a result of it. I then looked at Section 72 life insurance policies and how they can be used to avoid leaving loved ones with large tax liabilities on your death.


However, there is an alternative option to a Section 72 policy: the Section 73 policy.


A Section 73 policy is a savings policy whereby if the proceeds are used to pay gift tax, Revenue will not charge Capital Acquisitions Tax (CAT) on said proceeds. The current rate of Gift or Capital Acquisitions Tax is 33%. This is applied to all proceeds over certain tax-free thresholds less the small gift tax exemption if applicable. For example, the current tax-free threshold for a child is €310,000. So, for instance, if you were to gift a child property worth €400,000, they would be taxed at 33% on €87,000 (€90,000 less the €3,000 annual small gift tax exemption) resulting in a gift tax liability of €28,710. A Section 73 savings policy could be put in place to pay this gift tax liability once it arises.


There are, however, certain conditions that need to be met:

  • An existing savings plan cannot be used. The plan must be set up originally as a Section 73 policy
  • Premiums must be paid for at least 8 years
  • The person giving the gift must pay the premiums
  • If you stop paying regular premiums, even after the eight-year period, you cannot restart


If you have future plans to gift substantial assets (for example, physical properties, cash, shares, land etc.) to your loved ones (outside of your spouse) then it’s definitely something I would recommend discussing with a financial advisor.


Gerard Ward

21st June 2018