Overview
A Section 72 Whole of Life policy is a Revenue-approved life assurance policy designed to provide a lump sum on death to help beneficiaries pay inheritance tax.
With the current rate of inheritance tax at 33% and the Group A, B & C thresholds being €420,000, €44,000 & €22,000 respectively, many Irish families are aware that a significant portion of their family wealth will be lost to Inheritance Tax on their death.
The policy is typically arranged as part of wider estate plan, particularly where assets are illiquid or intended to remain within the family.
Section 72 cover is particularly relevant for individuals / couples who have capital assets greater than the Group thresholds of the beneficiary(ies) of their estate and therefore expect inheritance tax to be payable on their death.
Please note that Compass Private Wealth are not tax or legal advisors. Clients should obtain appropriate tax and legal advice before implementing any estate-planning strategy.
Key Features
o Whole of Life: Unlike a term assurance policy which provides cover for a fixed period, a Whole of Life policy is designed to remain in place for the full lifetime of the insured individual / couple, provided premiums continue to be paid.
o The policy must be correctly set-up and specifically endorsed as Section 72 from the outset with one of the Insurance Companies who produce this product.
o Single or Joint Life: The policy can be set up in Sole life only or on a Joint Life basis.
o Fixed Premiums: These policies are set-up with fixed, guaranteed monthly premiums that are not reviewable. This gives the policyowner(s) predictability from a cashflow perspective.
o Applications would have to undergo medical underwriting to qualify for the cover. An insurance company can refuse cover or load the premiums based on ill-health.
o Premium Cost: Generally, the cost of premiums tends to be a lot less than people may think, assuming that the applicant(s) is / are in good health and are not loaded.
Compass Private Wealth can generate indicative quotes once we know the age and sum assured.
Tax Considerations
Where the policy is correctly structured and the proceeds are used to pay the relevant CAT liability on death, the proceeds of the policy will not themselves create an additional CAT liability. In effect, the Section 72 sum assured pays the inheritance tax.
Spouses and civil partners are exempt from CAT on inheritances from each other. Therefore, it would not make sense for a married individual to set up a Single Life Section 72 Whole of Life policy if their Will states that all their assets go to the Surviving spouse. Married couples would be best advised to set up a Joint Last Survivor policy, so that the proceeds get paid out on 2nd death.
Note that Section 72 policies specifically include the 30% Income Tax on Approved Retirement Funds (ARFs).
If the sum assured from the Section 72 policy is greater than the tax payable, it just gets taxed as normal as any other inheritance.
Financial Planning Considerations
Premium affordability is important because the policy must remain in force for life. An individual / couple should be fully confident that the monthly premiums can be made for life.
One Insurance Company offer a ‘Life Changes’ option, giving policyowners the option to cease premiums after 15 years for a reduced amount of cover. This option costs a bit more but can be very valuable.
The policy should sit alongside a properly drafted Will and wider estate-planning advice. Executors should be made aware of this cover.
A Section 72 policy should be reviewed regularly to ensure the level of cover remains appropriate in light of changes to asset values, tax thresholds, family circumstances and legislation.
Example
Couple in their mid-60s:
Joe & Mary Bloggs are a married couple in their early 60s with three children, none of whom have received prior gifts.
Their Wills currently leave all assets to the other and then split their Estate equally between their 3 children. They have sufficient cashflow available due to pension income, passive investment income & savings to meet the monthly payments.
They have total assets of €5.2m plus €1.5m of ARFs (€750,000 of ARFs each):
As of today, there would be tax of €1.83m on the 2nd death for the family, calculated as follows:
o Inheritance Tax: 33% of €4m (€5.2m less the 3*€420k Group A Thresholds), equalling €1.3m
o Income Tax: 30% tax on the ARFs, equalling €500k
A Section 72 Policy of €1m could be put in place. This policy would cover most of the 30% ARF Tax & the Group A CAT tax. In effect, an additional €1m goes into the Estate, but that €1m is tax-free as it is less than the total inheritance tax payable.
Note that we would not advise that the full inheritance tax needs to be covered, as the Estate value might reduce by the time the inheritance event happens due to lifetime gifts and cashflow deficits.
Paying ARF Tax:
If one spouse has health issues and would not qualify for the cover based on medical underwriting, then the policy can be set up in sole name only.
In this case, the proceeds of the Section 72 policy, as well as the value of that person’s ARF, can then be ringfenced for children in the Will of the insured person. In the above example, if one spouse took out a single life Section 72 policy of €225,000 and his / her €750,000 ARF, as well as the Section 72 policy, were willed to one or more of the children, then the 30% tax on the ARF would be paid fully by the Section 72 policy. As the ARF is subject to a flat 30% Income Tax with no CAT thresholds, this is a clever way of paying the 30% tax on an ARF.
Summary
Section 72 Whole of Life cover can be a valuable estate-planning tool for clients who want to help beneficiaries meet future inheritance tax liabilities in a planned and structured way.
Should you wish to discuss whether this type of cover may be appropriate as part of your wider financial plan, please reach out to any of our team:
www.compassprivatewealth.ie/people
Disclaimer: Please note that the above points are our understanding and opinions on Section 72 Whole of Life cover and inheritance tax planning at this time of writing in November 2026. Compass Private Wealth does not provide tax or legal advice. No information above should be relied on as formal advice in relation to tax, legal or estate planning. It is for guidance purposes only.