Section 72 policy: plain-English guide for Irish probate
A life insurance policy taken out specifically to fund the beneficiary's CAT liability, set up so that the payout is exempt from CAT itself under Section 72 of the CATCA 2003.
What it means, in plain English
A Section 72 policy is a specific kind of life insurance designed to pay inheritance tax. The policy is taken out during the person's lifetime, is written under Section 72 of the Capital Acquisitions Tax Consolidation Act 2003, and on death the proceeds are paid directly to Revenue on behalf of the beneficiary without the payout itself counting as a taxable inheritance.
Section 72 policy in Irish probate practice
Without Section 72, a normal life insurance payout to a beneficiary who is not a spouse or civil partner is taxable as a Group B or Group C inheritance at 33%. A parent taking out a policy to help a child pay CAT would actually add to the child's CAT problem. Section 72 solves this by creating a formal category of policy where the proceeds, if used to pay the CAT arising from the same person's death, do not themselves count as a taxable benefit. The rules are specific. The policy must be written in a qualifying form from inception, so a standard whole-of-life policy does not retrospectively qualify. Premiums must be paid by the life insured out of their own resources. The proceeds must be used within a reasonable period to pay CAT arising on the life insured's death. If the policy pays out more than the CAT liability, the surplus becomes a taxable benefit. Section 72 policies are typically set up for estates where the beneficiaries face large CAT bills they cannot pay from the inherited assets alone, most commonly on farms, businesses, or illiquid property where forced sale would be the alternative.
Worked example
Tomás runs a small family business worth €900,000 and wants to leave it to his niece Clodagh. Clodagh's Group B threshold is €40,000, so the inheritance would trigger CAT of roughly €283,000 (33% of €860,000). Clodagh could not pay that without selling the business. Tomás takes out a Section 72 policy at age 65 for €300,000 in cover, paying the premiums himself from his own income. When Tomás dies, the policy pays out €300,000 directly to Revenue against Clodagh's CAT bill. The payout is not itself taxable. Clodagh keeps the business intact.
The statutory position
Section 72 of the Capital Acquisitions Tax Consolidation Act 2003 creates the relief. Revenue publishes detailed guidance on qualifying policies, including the rules on who can pay premiums, how long the proceeds can be held before use, and what happens to any surplus over the CAT bill. Section 73 provides an equivalent relief for qualifying insurance policies funding CAT on lifetime gifts.
Related terms in this glossary
Related reading
How ProbatePack handles Section 72 policy
Everything in the Preparation Pack plus the full inheritance-tax layer. CAT calculator for each beneficiary, individual IT38 drafts, Dwelling House Exemption assessment, Section 72 check, Agricultural and Business Relief assessments where applicable, and the Revenue clearance letter. For estates that will cross the Group A threshold.