Thinking of gifting property or investments to your children? Without careful planning, Capital Acquisitions Tax (CAT) could take a significant share, sometimes tens of thousands of euro, from the wealth you intended to pass on. A Section 73 policy is a smart way to reduce this burden and protect more for the next generation.
What is a Section 73 Policy?
A Section 73 policy is a savings plan specifically designed to help pay inheritance tax (CAT) on gifts of assets, such as property, shares, or cash, during your lifetime. It takes its name from Section 73 of the Capital Acquisitions Tax Consolidation Act 2003.
With the right structure, the proceeds from a Section 73 policy can be used to settle CAT liabilities without being taxed themselves. This ensures that more of your wealth is preserved for your children or beneficiaries.
How Does a Section 73 Policy Work?
A Section 73 policy is usually a regular premium life insurance savings plan, which must meet several conditions:
- The policy must be taken out to cover future gift or inheritance tax (CAT).
- It must be owned and paid for by the disponer (the person giving the gift/inheritance).
- Premiums must be paid regularly for at least 8 years.
- The proceeds must be used only to pay CAT on a gift or inheritance from the disponer.
- No extra tax is charged on money used for CAT.
- Premiums cannot be adjusted by more than 50% within any continuous eight-year period (unless reviewed by the life assurance company).
- Revenue’s rules and documentation requirements must be met.
Example: Gifting a Property
Let’s assume you wish to gift your daughter a property valued at €750,000. Under the current Group A threshold of €400,000, the taxable amount is €350,000. At the 33% CAT rate, this creates a liability of €115,500.
By funding this liability through a Section 73 savings plan over 8 years, you would contribute approximately €1,050 per month (based on an assumed annual growth rate of 5.5%). After 8 years, the projected gross fund value would be around €126,262, including about €25,462 of investment growth.
After Exit Tax at 41% is applied to the growth (c. €10,439), the remaining balance of €115,823 is available to settle the CAT bill. This ensures your daughter receives the full property value of €750,000 without the cashflow stress of finding €115,500 to pay Revenue.
Importantly, the proceeds of a Section 73 policy are not treated as an additional gift. Without this relief, gifting the €115,500 directly would itself create a further CAT liability of €38,115.*
* Ireland has a relief called CGT/CAT credit relief: if the child pays CAT on a gift and the parent has paid CGT on the same transfer, the child can claim a credit for the CGT paid against their CAT bill, to avoid double taxation.
Why is a Section 73 Policy Valuable?
- Tax Efficiency – The proceeds are not subject to CAT, provided they are used to pay the liability on a gift.
- Preserves Family Wealth – Your children keep the full value of your gift, rather than selling assets or using savings to cover tax.
- Control & Planning – You control the policy, decide the timing of your gift, and plan tax efficiency in advance.
- Complements Other Strategies – Section 73 works well alongside a Section 72 policy (designed for inheritance tax on death rather than lifetime gifts).
When Should You Consider a Section 73 Policy?
This approach is especially useful if:
- You plan to gift substantial assets during your lifetime.
- Your children or beneficiaries would otherwise face a large tax bill.
- You want to reduce the overall tax burden on your estate.
Final Thoughts
A Section 73 policy is a smart, strategic tool that can help high-net-worth families transfer wealth more efficiently. However, it must be implemented correctly to meet Revenue’s conditions and deliver the intended benefits.
If you’re considering gifting assets in the coming years, it’s worth speaking with a financial advisor about whether a Section 73 policy could support your goals.
Need Advice?
At Chartered Capital, we specialise in helping high-net-worth families structure their estates with clarity and tax efficiency. If you’d like to explore how a Section 73 policy could fit into your family’s succession plan, our team at Chartered Capital is here to guide you. Book a confidential consultation today and ensure your wealth is transferred with maximum efficiency and peace of mind. Contact Us to get started.
Important Notice
We are not tax advisors, and the information provided here is for general guidance only. It should not be relied upon as tax, legal, or financial advice. Tax rules are complex and subject to change. The application of reliefs such as Section 73 depends on individual circumstances. Please seek professional tax advice before taking action.
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