Section 73 Policy

Q: What Are the Benefits of a Section 73 Investment?

Flexibility for lifetime gifting. Reduces future inheritance tax exposure.

Q: What Is the Difference Between Section 73 and Section 72?

Section 72 addresses inheritance tax, while Section 73 focuses on CAT for gifts. Section 72 offers guaranteed payouts; Section 73 depends on investment performance.

Q: What Are the Risks of These Policies?

Section 72: Fixed costs and restricted use for inheritance tax. Section 73: Market risk and limited to CAT on gifts.

Q: Why Would Section 73 Be More Advantageous?

Ideal for reducing tax liabilities on lifetime wealth transfers. Offers potential growth through investments.

Section 73 Policy: Tax-Efficient Savings

If you’re planning for inheritance tax or capital acquisitions tax (CAT) liabilities, Section 73 policies can offer a tailored solution.

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What Are the Benefits of a Section 73 Savings Plan?

Section 73 policies allow individuals to save tax-efficiently for CAT liabilities, making them ideal for gifting wealth during your lifetime. Here are the key benefits:

Lifetime Gifting Strategy: Ideal for transferring wealth during your lifetime without burdening recipients with excessive taxes.
Flexible Contributions: Choose contribution amounts and frequency that align with your financial goals.
Wealth Preservation: Enables beneficiaries to retain assets without liquidation to cover tax bills.

What Is the Difference Between a Section 73 and a Section 72 Policy?

Aspect	Section 72	Section 73
Purpose	Covers inheritance tax liabilities	Covers CAT liabilities on lifetime gifts
Tax Treatment	Tax-free payout for inheritance tax use	Free from CAT
Risk Profile	Fixed premiums, guaranteed payout	Market-dependent growth, potential volatility
Flexibility	Restricted to inheritance tax	Suitable for gifting and inter vivos transfers
Who It’s For	Estate planners concerned with inheritance tax	Individuals planning tax-efficient lifetime gifts

Are Section 73 policies More Advantageous Than Section 72 policies?

Section 73 policies are ideal when planning inter vivos (lifetime) gifting.

Benefits include:

Maximising Lifetime Wealth Transfers: Tax-efficient savings for gifts during your lifetime reduce future inheritance tax exposure.
Potential for Growth: Investments in Section 73 can outpace fixed premiums of Section 72, offering better long-term returns.
Preserving Inheritance Assets: By addressing CAT liabilities earlier, beneficiaries inherit with fewer tax burdens.

Case Study: Managing a €2 Million Inheritance Tax Bill

Scenario 1: No Inheritance Plan

Inheritance Value: €2,000,000
Tax-Free Threshold: €335,000
Taxable Amount: €1,665,000 × 33% = €549,450
Outcome: Beneficiary pays €549,450, reducing the net inheritance to €1,450,550. You may need to sell assets or use part of the inheritance.

Scenario 2: Section 72 Policy

Scenario 3: Section 73 Policy

Key Comparison:

Aspect	No Inheritance Plan	Section 72 Policy	Section 73 Policy
Tax Liability	€549,450	Fully covered by the policy	Fully covered by the savings
Net Inheritance	€1,450,550	€2,000,000	€2,000,000
Cash Flow Requirement	Immediate payment by beneficiary	Policy premiums over time	Savings contributions over time
Flexibility	None	Fixed insurance terms	Flexible savings options
Risk	High (may need asset liquidation)	None (guaranteed payout)	Investment risk if growth assumed

Recommendations:

Bare Trusts

If you’re planning to gift money or assets to children or beneficiaries, using a bare trust can help eliminate or significantly reduce gift tax (Capital Acquisitions Tax or CAT).

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FAQs: Section 72 and Section 73 Policies

What Are the Benefits of a Section 73 Investment?

What Is the Difference Between Section 73 and Section 72?

What Are the Risks of These Policies?

Why Would Section 73 Be More Advantageous?

Can I Combine Section 72 and Section 73 Plans?

Yes, combining both allows comprehensive planning for inheritance tax and CAT, preserving more wealth for your beneficiaries.

Contact Smart Financial Today

At Smart Financial, we specialise in tailored savings solutions that help you protect your wealth and ensure your legacy. Speak to one of our expert advisors today to explore how Section 72 and Section 73 policies can fit into your financial plan.