“In this world, nothing can be said to be certain, except death and taxes” – Benjamin Franklin, in a letter to Jean-Baptiste Le Roy, 1789. Unfortunately over 200 years on, nothing has changed and while I can’t help you to avoid your eventual heaven-bound journey, the good news is that I can assist your legacy estate from the greedy taxman’s claws.
Many high net-worth individuals living in Ireland, have built up substantial assets in the form of their business, property, investments, and cash deposits and as they approach retirement, start to think about estate planning, or in other words, the succession of their assets.
When it comes to the sale of their business reduced rates of Capital Gains Tax can be achieved through the use of Entrepreneur Relief and Retirement Relief, which I have addressed in my earlier guide on business cash extraction, however this article is focused on the avoidance of Inheritance Tax.
When we all pass, the greedy tax man is waiting in the wings like a grim reaper, ready to cut and slice your estate, so when you have set out your will and have carefully divided your estate as you see fit, do you want to allow the Revenue to diminish what your beneficiaries receive?
The best way to explain how to avoid Inheritance Tax impacting the beneficiaries of your estate is for you to act in advance and to put in place a “Section 72 life insurance policy”.
This policy is done on a joint life second death basis (in most cases) and the payout is then tax-free when used to cover inheritance tax liabilities.
Let’s look at a worked example:
Section 72 – Estate Planning Example
€575,850 tax bill breakdown
Value of inheritance (Tony & Elaine’s estate) €2,750,000
Number of beneficiaries 3
Relationship of beneficiaries to deceased – 3 children
Threshold amount applicable (Group A) €335,000 per child
Taxable inheritance €2,750,000 – €1,005.000 = €1,745,000
Tax payable (at 33%) €575,850
Section 72 – Life Insurance breakdown
Male, aged 60 next birthday, Non-Smoker, life cover €575,850
Female, aged 53 next birthday, Non-Smoker, life cover €575,850
Whole of Life Cover with benefits and premiums not increasing.
1% levy included.
Premium: €688.18 PM
Assumes payable on second death age 90 = 37 years
€688.18 PM *12 = €8,258.16 PA
Total premium payout: €305,551.92
Total policy payout: €575,850.00
Section 72 – Estate Planning Outcome
From the taxman’s hands back to their children = €575,850
Amount of estate saved after cost of section 72 life cover: €270,298.08
Speak with a Financial Advisor
To arrange your free no-obligation consultation by phone contact us today.
Contact: Ken O’Gorman – Director – One Quote Financial Brokers on: 01 845 0049 or email: ken@onequote.ie
Or enquire online and give us a quick outline of how we can help.
