Life assurance against parent for inheritance tax

[car]

I've a vague recollection of reading that its possible to take out life assurance on parents to mitigate against an expected hit on inheritance tax.

1. Is this possible?

2. If possible, there's a number of investment properties involved, while its not too hard to estimate the tax as the properties are valued now, is it possible to build in a growth/reduction factor on that. For example, if we estimate the tax would be 200k now, in 5 years time, it could be 100k or 300k, (investments may rise or fall blahblah), can the assurance policy be setup to increase or decrease in value?

3. Anyone doing this and give a bit of guidance on costs, health being what it is, both parents are about the 70 mark, with family history life expectancy would be about the 75 mark. Do you take out the assurance for 5-10-15 years?

TIA

 

[car]

After a bit of googling and ringing around I found the section 72 insurance premium, proceeds are not taxable if the policy is taken out specifically to cover inheritance tax. few Ts and Cs but this mostly answers the question if anyone else was thinking about it.

http://www.revenue.ie/en/tax/cat/guide/insurance-policies.html

Still like to hear of anyones experience of this though.

 

[Joe_90]

A person can take out a policy themselves to cover CAT it's known as a S60 policy and the benefit is that the proceeds to the extent that they pay tax are not subject to CAT.

I would have thought that given the age ect outlined that the premiums would be fairly high!

I don't know if a child can take out life assurance on their parents but I'm sure LD will answer that one.

 

[110quests]

Are the payouts on life policies with death benefit subject to tax ?if they are part of the estate of deceased , in a will? That is, with children of the deceased inheriting but within the max allowable before taxes?

 

[car]

Are the payouts on life policies with death benefit subject to tax ?if they are part of the estate of deceased , in a will? That is, with children of the deceased inheriting but within the max allowable before taxes?

In general yes its taxed outside the allowances but the section 72 life insurance policy (if I read it right) specifically allows for the policy to pay off the inheritance tax.

Say sum inherited after allowances was 210k. 33% is taxed. = 70k.

So if you have a sect. 72 for 100k (investments may rise or fall). 70k can be used to pay off the inheritance tax and the remaining 30k is subject to inheritance tax.

 

[110quests]

Thank you Car for that. The total value of inheritance, including death benefit from policies , cash, and value of house to be sold would be approx. 250000 between five children so no tax would apply then ?

 

[car]

Thank you Car for that. The total value of inheritance, including death benefit from policies , cash, and value of house to be sold would be approx. 250000 between five children so no tax would apply then ?

I would get professional advice to clarify but I would say no tax applies based on my understanding of it. If each child is left an equal portion than the split is 50k each.

The threshold is 225k per benefitting child from 6/12/2012. ie, if they dont go over the threshold they dont get taxed.

http://www.revenue.ie/en/tax/cat/thresholds.html

 

[twofor1]

For example, if we estimate the tax would be 200k now.............

both parents are about the 70 mark, with family history life expectancy would be about the 75 mark.

If the insurers insured a person for €200K for 5 years and thought that person’s life expectancy was 5 years,

Surely then the insurers would have to charge a premium of €200K over the five years plus their mark up and expenses etc.

Might be cheaper just to pay the tax whenever,

No experience whatsoever in this field, but can’t see this been an viable option in the circumstances outlined anyway.

 

[car]

If the insurers insured a person for €200K for 5 years and thought that person’s life expectancy was 5 years,

Surely then the insurers would have to charge a premium of €200K over the five years plus their mark up and expenses etc.

Might be cheaper just to pay the tax whenever,

No experience whatsoever in this field, but can’t see this been an viable option in the circumstances outlined anyway.

all depends on the premiums. It becomes a maths exercise combined with a best guess on life expectancy once we see the figures involved.