While the parent-to-child tax-free threshold on inheritance did increase to €400,000 in 2024, the sharp rise in property values over recent years means more beneficiaries are now falling outside that capital acquisitions tax (CAT) threshold. They face a tax bill of 33 per cent on anything over that figure.It’s becoming a consideration for more and more families. About 15,000 people paid CAT in 2023, up by 36 per cent on the figure a decade earlier – albeit that was in the post-financial crash property price slump. Receipts in 2025 jumped by 31 per cent on the previous year, topping €1 billion for the first time. It’s why some families look to plan ahead to try to offset the impact of any such burden. After all, people will want to keep certain assets in their family but a hefty tax bill might force them to sell. So, what are the options to help settle a bill if it comes to it?Save a lump sumYou could put aside some money to leave to your family with the express purpose of paying off any tax bills. The kicker with this approach, however, is that this lump sum will also form a taxable part of your estate. So, if you save €100,000 to gift to your children to help settle any bills after your death, this will generate a tax bill in itself of €33,000 if the recipients have already surpassed their tax-free thresholds.“There’s gift tax on that gift tax,” as David Byrne, savings and investment propositions lead at Aviva, puts it.So is there a better option?Section 72A more tax-efficient option is something called a Section 72 policy, an insurance policy that covers the cost of settling an inheritance tax bill in the event of your death. It can make good financial sense: if you die within a few years of setting it up, for example, the payout can be considerable. Crucially, such a policy, provided it’s Revenue approved, doesn’t incur a tax liability itself.Section 72s are structured as whole-of-life policies, which means that as long as you keep paying into them, they will deliver a lump sum upon your death. This can then be used to pay off inheritance taxes owed on your estate. That might allow your children to hold on to property, investments, businesses etc, without having to sell up to pay a tax bill. In Ireland, such policies are offered by Zurich, Irish Life and Royal London.However, they can be expensive, particularly if you live a long time. As Nick McGowan, founder of insurance specialist Lion.ie notes, this is because of how they are used.“It is designed to pay out whenever you die, whether that’s next year or 40 years from now,” he says, adding that, unlike a term policy, people rarely cancel a S72 policy once it is established as part of an inheritance tax plan. [ ‘Would gifting my daughter some of her inheritance while she’s in London avoid tax implications?’Opens in new window ]“The insurer knows there is a very high probability that the policy will remain in force and that they will eventually have to pay the claim. The only real uncertainty is when.”This means premiums are naturally higher than for term insurance. “However, that doesn’t mean the policy is poor value,” says McGowan, adding that when you compare total possible premiums to the eventual payout, such policies can appear to be “surprisingly good value”.He gives an example of a non-smoking 60-year-old man, looking for €500,000-worth of cover. Monthly premiums would be €1,000. If the man lives until he’s 85, he will pay monthly premiums for 25 years – so €300,000 – but will get a payout of €500,000.Obviously, the younger you are, the lower the premiums – though the longer you may have to pay them.The key thing to remember – especially when setting up such policies – is that their tax-free status extends only to their use to meet an inheritance tax bill.Section 73 policies are becoming increasingly popular against a backdrop of rising intergenerational wealth transfer in IrelandUsing the example above, if when this 60-year-old non-smoker dies, and his beneficiaries have inheritance tax liabilities of €500,000, the policy proceeds pay the bill, making life easier for those who are inheriting.However, if the inheritance tax bill is only €400,000, the balance of €100,000 becomes part of his estate and subject to inheritance tax itself.There are other restrictions on such policies. First, they must be taken out before you reach the age of 75 and the person leaving the inheritance must be the owner of the policy.McGowan says the recommended way to structure such a policy is joint life, second death, as the assets can pass tax free to the surviving spouse on first death, with any potential inheritance tax bill arising only on the second death. He also suggests a policy with fixed, rather than reviewable, premiums.One downside of a Section 72 is that if you can no longer afford the premiums and stop paying them, you lose your cover – and all the premiums you have paid to date. It has no cash-in value; it will pay out only when you die.Section 73A third option then, which is more like a savings plan, is a Section 73 policy. This is a savings scheme that can be invested and gifted while you are still alive to help settle a CAT bill, or bequeathed upon your death.If invested well, the growth from the fund could be enough to settle a tax bill, with the capital kept intact.Typically, Byrne says, families avail of such a plan to pay off any tax obligations that might arise when gifting an asset to a family member while still alive. He says they are becoming increasingly popular against a backdrop of rising intergenerational wealth transfer in Ireland. So, for example, if you have an investment property that you want to gift a child, saving in a Section 73 will allow you to cover any CAT that arises when you make the transfer. As with a Section 72, the proceeds of this savings scheme don’t incur a tax liability. The big difference is that, firstly, a Section 73 policy is a savings scheme so it will only pay out what you put in, plus any gains that arise. Secondly, you can choose to keep the funds yourself if you so wish. A minimum term of eight years applies for the policy to meet Revenue approval.[ Will my daughter be hit with two tax bills when she inherits holiday home?Opens in new window ]“Cash it in early and it won’t qualify; the money could still be taxed as a gift,” warns Byrne, if you were to then use it to pay off a tax bill. Another Revenue requirement is that the annual premiums must not be less than 50 per cent of premiums in the first year. What some people do, Byrne says, is set up several savings policies with different monthly premiums. If they can no longer afford these, they can then close some – but not all – of the policies. “They’ll keep repayments going on the larger one and protect that,” he says. What resonates with people, Byrne says, is that Section 73 policies operate like regular savings plans, whereby people contribute on a monthly or annual basis. You can start investing from as little as €100 a month, across a range of investment options. With Aviva for example, these include multi-asset funds, as well as index funds tracking European and US equities.A Section 73 can be encashed, with the funds used for a different purpose.[ Can I avoid capital gains tax on a rental property by gifting it to my child?Opens in new window ]“It’s your money in the future. You can decide,” says Byrne. “If not needed for tax, the funds remain available for other uses, giving flexibility for future financial needs.”This means you can decide to keep it going, use the money yourself, or use some or all of it to offset gift tax.Byrne finds that a “good number” of people will endorse a regular saver as a Section 73 policy, and end up just using the proceeds themselves. There should be no real cost of doing so, as you will pay annual management charges on the fund in the same manner as if it was just a regular savings policy. Exit tax on gains will apply and will be paid in line with current deemed disposal rules.There are no figures on the number of Section 72 or Section 73 policies in existence, as Revenue does not maintain such records. However, it does have information on claims made under such policies and the value of tax covered in each period, as reported on capital acquisition tax (more familiar as inheritance or gift tax) returns. Figures provided by Revenue show a wide variance in the amount of tax paid with such policies each year. In the 12 months from September 2020, for example, just €6,132 in tax was paid with such a policy. But in the same period in 2024/25, tax worth more than €10 million – indicating total taxable assets of more than €30 million – was settled with such a policy.