Section 72 & Section 73 Policies (Combined)
When putting policies in place to reduce Capital Taxes between generations (Inheritance Tax on death and Gift Tax on Lifetime passing of assets), it is important for Clients to choose the most appropriate product for their specific needs and preferences.
The main differences between Section 72 & Section 73 policies are below:
A Section 72 Policy is a ‘Whole of Life’ Assurance policy, which pays out a lump sum on death. A Section 73 Policy is a Savings / Investment Policy, so they are fundamentally completely different.
When taking out a Section 72 policy, the applicant(s) have to be medically underwritten by the Insurance Company. As a Section 73 is basically a Savings / Investment policy, no such medical underwriting exists
A Section 73 Policy can be cancelled at any stage and the value is the total contributions plus or minus fund performance. If a Section 72 Policy is cancelled in your lifetime there is no lump sum and all premiums are lost (with the exception of one Provider who has a 15-Year Life Changes option). In this way, a Section 72 policy is a far bigger cashflow commitment
The main similarities with each policy are:
Both Section 72 & Section 73 policies must be set up with an Insurance Company
Both Section 73 & Section 73 have the purpose of reducing 33% Capital Tax