Understanding Section 73 - Help your clients transfer their assets tax efficiently

The lifetime transfer of an asset can give rise to a gift tax liability for the beneficiary of the gift. To fund for this gift tax liability, your client can endorse their Aviva Savings Plan policy under Section 73 of the Capital Acquisitions Tax Consolidation Act (CATCA) 2003.

The benefit of using an Aviva Savings Plan policy to fund for a future gift tax liability is that if the qualifying conditions, as prescribed by the Irish Revenue Commissioners (“Revenue”), are met, the proceeds of the policy (to the extent used to pay the gift tax liability of the beneficiary) are exempt from Capital Acquisitions Tax (‘CAT’) and will not increase the gift tax liability of the beneficiary.

Some of the Revenue qualifying conditions of section 73 CATCA 2003 are:

• The policy must be in a form approved by Revenue. The Aviva Savings Plan policy is approved by Revenue for the purposes of section 73 CATCA 2003.
• The life insured and policyholder must be the same person. Jointly owned policies will only qualify for endorsement under section 73 CATCA 2003 where the joint owners are a married couple or registered civil partners. The premiums must be paid by the policyholder.
• The policy must specify that it has been effected under section 73 CATCA 2003 from the outset. You cannot add the endorsement to existing Aviva Savings Plan policies.
• Premiums must be paid annually (including a derivative of an annual premium such as monthly premiums) for a minimum of 8 years. The net premium paid (the annual premium in any continuous twelve-month period less any benefit received from the policy e.g. a partial encashment) cannot be less than 50% of the net premium paid in any other continuous twelve-month period or less than 50% of the annual premium paid in the first continuous twelve-month period.
• On encashment, if all Revenue qualifying conditions have been adhered to, the policy proceeds will allow your client to pay the gift tax liability of a beneficiary on a lifetime gift made within one year of the policy being encashed, without it giving rise to another taxable gift.

The policyholder is under no obligation to use the proceeds of their Aviva Savings Plan policy that has been endorsed under section 73 CATCA 2003 for the payment of gift tax, making this a flexible financial planning option for your client. Any proceeds of a section 73 policy which are gifted but not used to pay gift tax will be treated as an additional gift and will be subject to CAT.

Talk to your Aviva Account Manager today about using an Aviva Savings Plan policy to help your client fund for a future owing gift tax liability.

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Stephen Rice
Pensions & Investment Lead
Aviva Life & Pensions Ireland

It is the responsibility of the policyholder to ensure the Revenue qualifying conditions are met to avail of the relief under Section 73 of CATCA 2003.

Remember that tax laws can change over time, so it is important to check revenue.ie for the latest information. The information provided is accurate at the time this article was created in November 2023. You should seek professional tax and legal advice to satisfy yourself of your own tax position. The information given is a guideline only.

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