Secure Your Financial Future
Section 72 Life Assurance & Section 73 Savings Plans
The Complete Guide to Reducing Inheritance Tax (CAT) in Ireland Inheritance tax — officially known as Capital Acquisitions Tax (CAT) — can create a significant financial burden for families in Ireland. Without proper planning, beneficiaries may need to sell property, investments or business assets simply to pay the tax bill. Fortunately, Irish legislation provides two Revenue-approved planning tools designed specifically to help families manage inheritance tax liabilities:- Section 72 Life Assurance Policies
- Section 73 Savings Plans
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What Is Capital Acquisitions Tax (CAT) in Ireland?
Capital Acquisitions Tax is charged when someone receives:
- A gift.
- An inheritance.
- Certain benefits from trusts.
CAT is administered by the Revenue Commissioners and is currently charged at 33% on amounts above the relevant tax-free threshold.
Thresholds depend on the relationship between the disponer (person giving) and the beneficiary. For example:
- Children have the highest threshold (Group A).
- Siblings, nieces, nephews and others have lower thresholds.
- Read more about threshold rates here.
Tax is generally payable within months of receiving the inheritance — which can create immediate liquidity pressure. This is where structured planning becomes essential.
Section 72 Life Assurance Policy – Qualifying Conditions & How It Works
Section 72 of the Capital Acquisitions Tax Consolidation Act 2003 allows parents (or others) to take out a qualifying life insurance policy, the proceeds of which are used to pay CAT.
How It Works
- Parents estimate potential CAT exposure.
- They take out a qualifying whole-of-life policy.
- Premiums are paid during lifetime.
- On death, the policy pays out.
- Proceeds are used to pay the CAT bill.
If structured properly, the payout does not increase the inheritance tax liability.
When Is Section 72 Suitable?
- Parents leaving property to children.
- Families with investment portfolios.
- Business owners passing shares.
- Individuals with rising asset values.
Advantages & Limitations
Advantages
- Guarantees a tax-efficient lump sum.
- No investment risk.
- Simple structure when set up correctly.
- Ensures beneficiaries don’t need to sell assets.
Limitations
- Premium cost increases with age.
- Requires correct policy wording.
- Must be used to pay CAT to qualify for relief.
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Section 72 vs Section 73 — Key Differences
|
Feature |
Section 72 |
Section 73 |
|
Trigger |
Death |
Policy maturity (min. 8 years) |
|
Structure |
Whole-of-life insurance |
Investment savings plan |
|
Risk |
Low (insurance based) |
Market risk applies |
|
Purpose |
Cover tax on death |
Pre-fund future tax |
|
Suitable For |
Immediate protection |
Long-term planners |
Section 73 Saving Plan – Qualifying Conditions & How It Works
A Section 73 policy is an investment-based life assurance savings plan designed to accumulate funds over time to meet a future inheritance tax bill. Unlike Section 72, it is not triggered by death.
Key Requirement
To qualify for favourable CAT treatment:
- Appointed date must be at least 8 years after policy inception for relief to apply.
- If the proceeds are used within 12 months of this date to pay gift tax, relief applies.
- It must satisfy Revenue conditions under Section 73.
- Unused proceeds are deemed a taxable gift if not applied to CAT.
How It Works
- Individual invests lump sum or regular premiums.
- Funds grow within a life assurance wrapper.
- After 8 years, funds can be withdrawn.
- Proceeds are used to pay CAT.
- Tax relief applies if rules are satisfied.
When Is Section 73 Suitable?
- Individuals planning well in advance.
- Parents with predictable future liabilities.
- Those comfortable with investment risk.
- People wanting a structured savings approach.
Advantages & Limitations
Advantages
- Allows pre-funding of tax.
- Investment growth potential.
- Structured estate planning tool.
Limitations
- Investment risk.
- 8-year minimum term.
- Relief can be lost if structured incorrectly.
If you’re unsure, we’ll point you in the right direction:
Example: How These Policies Can Manage CAT Pressure
1. Section 72 Life Insurance Scenario: Protecting the Family Home
John and Mary, both in their 60s, have a family home currently worth €900,000.
They want to leave it to their two children who have €400,000 each left of their CAT group A threshold remaining.
They take out a joint-life, second-death Section 72 life assurance policy with a sum assured of €100,000 to cover potential inheritance tax.
2. Section 72 Life Insurance Scenario: Transfer Family Business
John owns a €3,000,000 company and plans to leave it to his nephew. After 90% Business Relief, €300,000 is taxable.
With the Group B threshold of €40,000, the remaining €260,000 is taxed at 33%, creating a CAT bill of about €85,800.
Without planning, the nephew may need to sell shares or borrow to pay the tax.
A Section 72 whole-of-life policy provides a lump sum to cover the liability, allowing the business to transfer intact.
1. Section 73 Saving Plan Scenario: Family Property Transfer
Mary owns several investment properties.
She has already gifted one property to her daughter, Sinéad. This first gift used up all of Sinéad’s Group A CAT threshold.
Mary now plans to gift Sinéad a second property worth €250,000. As Sinéad has no remaining threshold, the full amount is taxable, giving a CAT liability of €82,500.
To help cover this tax, Mary sets up a Section 73 investment savings plan. She invests €60,000 upfront and €2,500 per year for 8 years.
After 8 years, Mary transfers the property to Sinéad and uses the Section 73 policy proceeds to pay the €82,500 CAT liability.
This means Sinéad does not have to fund the CAT bill herself, and the €82,500 used from the Section 73 policy is not treated as an additional taxable gift.
This avoids a further CAT charge of €27,225 (33% of €82,500).
- Value of gift: €150,000
- Less Group B threshold: €40,000
- Taxable amount: €110,000
- CAT @ 33%: €36,300
Common Mistakes That Can Invalidate Relief
Revenue relief is conditional. Common errors include:
- Incorrect policy wording.
- Assigning ownership improperly.
- Not using proceeds to pay CAT.
- Failing the 8-year requirement (Section 73).
- Not reviewing thresholds as laws change.
- Find official revenue guidance here: Sections 72 – 73: Relief in respect of certain policies of insurance
Professional advice is essential when structuring these arrangements.
What Is a Section 72 Life Insurance Policy?
Section 72 relief applies when:
- It is in a form approved by the Revenue Commissioners.
- The premiums are paid by the insured during their lifetime.
- Is expressly taken out for the purpose of paying inheritance tax (relevant tax).
- If proceeds are applied to pay inheritance tax, they are exempt from CAT.
- Pays out only on the death of the disponer.
- Provides funds specifically to cover CAT on inherited assets.
- Commonly used in estate planning and succession planning.
- Helps prevent the forced sale of property or business assets to pay tax.
This is typically suitable where assets will pass on death.
What Is a Section 73 Savings Plan?
Section 73 relief applies when:
- The policy has an appointed date at least 8 years after inception.
- Proceeds are used to pay gift tax.
- Used to pay CAT on a gift made during your lifetime.
- The gift must be transferred while you are alive — it cannot apply to inheritances.
- Builds up a fund over time rather than paying out on death.
- Unused proceeds are deemed a gift for CAT purposes if not applied.
This is often used where parents want to transfer property, shares, or cash during their lifetime.
Why Professional Advice Matters
Inheritance tax planning is highly technical and regulated.
Policies must be:
- Structured correctly
- Aligned with Revenue rules
- Regularly reviewed
- Integrated with your overall estate plan
At Greenway Financial Advisors, we provide tailored inheritance tax planning advice based on your specific financial circumstances.
Speak to an Advisor About Inheritance Tax Planning
If you are concerned about the impact of Capital Acquisitions Tax on your family:
- We can estimate potential exposure
- Review existing policies
- Assess suitability of Section 72 or Section 73
- Build a structured estate plan
Early planning provides the greatest flexibility.
Frequently Asked Questions
Section 72 & Section 73 Policies in Ireland
What is a Section 72 life assurance policy?
A Section 72 life assurance policy is a Revenue-approved whole-of-life insurance policy designed to cover an expected inheritance tax (Capital Acquisitions Tax) liability.
When structured correctly, the policy payout can be used by beneficiaries to pay inheritance tax without having to sell family assets such as property, farms or businesses.
How does a Section 72 policy reduce inheritance tax?
What is a Section 73 savings plan?
A Section 73 policy is a specialised investment plan designed to build up a fund to pay a future inheritance tax liability.
It is commonly used by parents or grandparents who want to proactively plan for inheritance tax during their lifetime rather than relying on a life insurance payout.
What is the difference between Section 72 and Section 73?
| Section 72 | Section 73 |
| Life insurance policy | Investment savings plan |
| Pays out on death | Builds value during lifetime |
| Covers expected inheritance tax bill | Creates a fund to pay future tax |
| Typically whole-of-life cover | Investment-based structure |
Section 72 protects against tax on death, while Section 73 is a long-term tax planning strategy.
Who should consider a Section 72 policy?
You may benefit from a Section 72 policy if:
- Your estate exceeds current inheritance tax thresholds
- You own property, farmland or a family business
- You want to avoid forcing beneficiaries to sell assets
- You want certainty around inheritance tax planning
It is particularly common among property owners and business owners in Ireland.
Who is Section 73 most suitable for?
Section 73 is often suitable for:
- Parents planning large gifts to children
- Grandparents planning wealth transfer
- Individuals who want to gradually build a tax fund
- Families seeking structured inheritance tax planning
It works best when planned well in advance.
What is the inheritance tax rate in Ireland?
The current Capital Acquisitions Tax (CAT) rate in Ireland is 33%.
Tax applies to gifts and inheritances above the relevant tax-free thresholds, which vary depending on the relationship between the giver and the beneficiary.
(We recommend always checking current thresholds, as they may change in future budgets.)
Can Section 72 or Section 73 policies eliminate inheritance tax?
No.
They do not remove the tax liability. Instead, they are structured financial planning tools designed to fund the liability efficiently and prevent financial stress for beneficiaries.
Are Section 72 and Section 73 policies approved by Revenue?
Yes — when structured correctly through approved providers, both policies are recognised under Irish tax legislation for inheritance tax planning purposes.
However, proper advice and structuring are essential to ensure compliance.
When should inheritance tax planning start?
The earlier, the better.
Inheritance tax planning is most effective when started years before assets are transferred. Early planning provides:
- Lower insurance costs
- More investment growth potential
- Greater flexibility
- Reduced financial pressure on beneficiaries
How do I know if I need a Section 72 or Section 73 policy?
The right strategy depends on:
- Your total estate value
- Your family structure
- Your gifting plans
- Your health (for insurance options)
- Your long-term financial goals
A personalised inheritance tax review can help determine the most suitable solution.
Final Thoughts
Inheritance tax planning in Ireland requires foresight. Section 72 and Section 73 policies are powerful tools — but only when structured correctly.
For families with property, businesses or substantial assets, proactive planning can prevent financial stress for the next generation.
Disclaimer Notice
Important Information
This page is intended to provide general information and should not be considered as financial advice. Each individual’s financial situation is unique, and any planning should be tailored to your personal circumstances. Greenway Financial Advisors is committed to offering personalised advice, encourages you to consult with our experts to ensure your financial strategies align with your specific needs and goals.
Greenway Financial Advisors Limited is regulated by the Central Bank of Ireland. Registered No. C168372