Life Insurance Policies for Inheritance Tax - Opinions?

[aircobra19]

Never occurred to me that you could use Life Insurance, as a means to offset Inheritance tax (Capital Acquisitions Tax). But I suppose why not, and as Inheritance Tax has become so expensive its probably a good idea. The only drawback is that the premiums are expensive, especially if you take it up later rather than sooner. Is there anything specific to look out in these types of policies, particular to paying CAT, or is just the same as any Life policy. Just looking for some thoughts, opinions on it.

 

[LDFerguson]

Such policies are generally known as "Section 60" policies, after the section of the Finance Act that introduced the concept.

You really need a "whole life" policy rather than a term assurance policy for a specific term, as your tax liability is unlikely to go away after a specific term.

Like all "whole life" policies, there are guaranteed fixed premium contracts and reviewable premium contracts. The former are preferable but more expensive.

If the estate is currently owned by a married couple, you would take out a Section 60 policy that only pays out on the second death (unlike typical family cover or mortgage protection polices which pay out on the first death). A joint-life second-death policy will tend to be cheaper than a single life policy or a joint-life first-death policy.

Technical information from Revenue available [broken link removed].

A Section 60 policy should be set up under a Trust to ensure that the proceeds are dealt with in the correct manner and that the proceeds of the policy itself doesn't form part of the estate.

Liam D. Ferguson
www.ferga.com

 

[mercman]

I took out a Section 60 Policy around 15 years ago, on a Joint Life second death basis with Hibernian Life. They at the time were very price competitive . Make sure you get one linked to inflation as this was denied to me as I have MS. Also it is a waste of time if not written in trust. If you require a large amount you will both have to have medicals.