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Are you planning to make gifts of money or other assets to your family in the future?
If you receive a gift, you may have to pay tax on it, this tax is known as Capital Acquisitions Tax, gifts and inheritances can be received free from CAT up to a certain amount. The tax-free amount depends on your relationship to the person giving the gift.
With a Section 73 Savings Plan, you can save specifically to cover this tax liability.
What is A Section 73 Policy?
A Section 73 Savings Policy is a savings policy whereby the proceeds of the savings policy
can be used by your children to pay their CAT bill.
Section 73 extends relief to insurance policies taken out by the insured person expressly for the payment of gift tax on inter vivos* dispositions.
The following conditions apply;
That is in a form approved by Revenue.
In respect of which annual premiums have been paid by the insured person during his or her lifetime.
The proceeds of which are payable on the “appointed date”, and Tax and Duty
Manual Insurance Policies.
That is specifically taken out under section 73 to pay “relevant tax” (i.e. gift tax or
inheritance tax due and payable in respect of an inter vivos disposition).
The “appointed date” is a date that is more than 8 years after the date on which the policy is affected. This time requirement is shortened to an earlier date on which the proceeds are paid where the insured person, or his or her spouse or civil partner, dies or becomes critically ill. The relief does not apply to tax liabilities arising on appointments of property from an inter vivos discretionary trust set up by the insured person. Any unused proceeds of a Section 73 policy are deemed to be taken as a gift and are subject to CAT.
Who takes out a Section 73 Policy?
The person giving the gift takes out the policy and are also the owner of the policy. If you
wish to endorse your policy under Section 73 of CATCA 2003, the lives assured, and the
policyholder must be the same person. Joint applicants must be spouses or civil partners.
Section 73 policies may be suitable for parents and relatives such as grandparents and
godparents who would like to help pay their loved one’s gift tax liability from the lifetime
transfer of an asset.
*[inter vivos - between the living].
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