Using life insurance to beat inheritance tax

Over the last few years, the Government has reduced the tax-free threshold for capital acquisitions tax (CAT) to €225,000 for people who stand to inherit assets when their parents die.

So if a deceased husband and wife willed their family home worth €1,000,000 to their three children, then (and as long as they had not been living there) they would each be facing an inheritance tax bill of €35,725 on the last death of either spouse, according to Michael Bradley of Clear Financial.

“This begs the question, where do the children find the funds to pay this tax bill?” he said. “Sadly, for most, they may have no choice but to sell the family home or delve into any family savings or investments that have been willed onto them.”

However, there is a simpler and more cost-effective solution, which is to take out a Section 72 life insurance policy that will pay the tax bill for them.

Source: Using life insurance to beat inheritance tax