Aviva Section 73 Savings Plan

Capital Acquisition Tax (CAT) is a tax on gifts and inheritances. Your client’s beneficiary may receive gifts and inheritances up to a set value over their lifetime before paying CAT. The current thresholds are as follows. Gifts received below these thresholds are not subject to CAT:

The current CAT tax rate as of October 2024 is 33% for amounts above the threshold.

Section 73 Capital Acquisitions Act 2003 allows clients to use the proceeds of an Aviva unit-linked Savings Plan to pay their beneficiary’s gift tax. However, certain Revenue conditions must be met for this provision to be applicable.

• Revenue qualifying conditions for availing of relief under Section 73 of CATCA 2003 are as follows:
  • The policy must be in a form approved by Revenue. The Aviva Savings Plan policy is approved by Revenue for Section 73 relief.
  • The life insured and policyholder must be the same person. Jointly owned policies will only qualify for endorsement under Section 73 where the joint owners are a married couple or registered civil partners.
  • The policy must specify that it has been endorsed under Section 73 from the outset of the policy. You cannot add the endorsement to an existing policy.
  • Premiums must be paid annually (including a derivative of an annual premium such as quarterly or monthly premiums) for a minimum of 8 years. If annual premiums are not paid in the first eight years, the policy proceeds will no longer qualify for Section 73 relief.
  • The net* premium paid in any continuous 12-month period is less than 50% of the net premium paid in any other continuous 12-month period or is less than 50% of the annual premium paid in the first continuous 12-month period of the policy.
  • The policyholder(s) must pay the premiums of the policy.
  • On encashment, if Revenue qualifying conditions have been adhered to, the policy proceeds will be exempt from gift tax when used to pay gift tax on a lifetime gift made within one year of encashing the policy.
  • Any proceeds of a Section 73 policy that are gifted but not used to pay gift tax will be treated as an additional gift and subject to CAT.
  • Net premium* means the annual premium in any continuous twelve-month period less any benefit received from the policy, e.g. a partial encashment.
  • The net premium* paid in any continuous 12-month period is less than 50% of the net premium paid in any other continuous 12-month period or is less than 50% of the annual premium paid in the first continuous 12-month period of the policy.

* Net premium means the annual premium in any continuous twelve-month period less any benefit received from the policy, e.g. a partial encashment.

• It is important to remember that the above is a summary only. For up-to-date and complete details of the Revenue qualifying conditions for Section 73 CATCA relief, please refer to the Revenue CAT Manual.

If your client acts outside of the qualifying Revenue conditions the policy will cease to be in a form approved by the Revenue, and they will not be entitled to avail of Section 73 relief.

This plan is an excellent way to protect your client’s beneficiaries from a potentially significant gift tax burden.

The individual taking out the policy owns it.

No, an existing policy cannot be endorsed under Section 73. To qualify for Section 73 relief, the policy must be endorsed explicitly under Section 73 of CATCA 2003 from the commencement date.

If your client dies before the minimum 8-year term, then the policy proceeds will form part of your client’s estate.

Yes, if your client has multiple beneficiaries with multiple gift tax liabilities, one Section 73 policy can be taken out to cover these tax bills. However, careful planning would need to be done to ensure the correct amounts are available to cover the liabilities at the right time.

No.

Revenue treats the gifting of deposit savings as a separate gift. So, using your deposit savings to pay your beneficiary’s gift tax liability will increase their tax bill. On the other hand, the proceeds of a Section 73 Savings policy are specifically exempt from gift tax when used to pay a gift tax liability.

No. By simply endorsing their policy from the outset, they can use it for gift tax purposes, but they are not tied to this and could use the proceeds for something else.

You use the Standard Savings Application Form

You can share the Section 73 brochure with your clients. It is also essential to share the Savings Plan Brochure with them.

Yes, the product can be keyed on BrokerSecure.

The benefit of using the Aviva Savings Plan policy to fund for a future gift tax liability is that if the qualifying conditions are met, the proceeds of the policy (to the extent used to pay the gift tax liability of the beneficiary) are exempt from CAT and will not increase the gift tax liability of the beneficiary.

Responsibility for determining eligibility for the exemption, applying it correctly, and meeting any reporting obligations to Revenue rests with the recipient of the gift (or, where applicable, their parent or legal guardian).