Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I thank the Senator for raising this issue. The proposal is as follows: "The need for the Minister for Finance to examine the feasibility of a legislative change to allow children to take out life cover in respect of their parents for the specific purpose of paying inheritance tax after the death of the parent(s)." I might come back to some of the other points the Senator has raised in my second contribution.

The issue of inheritance tax after the death of an individual's parents is a sensitive subject, and one where qualified financial advisers are available to advise. The Senator has been talking to a broker on that but I am talking about tax experts as well. He will also appreciate that the Minister for Finance is responsible for the legal framework for insurance and that neither he nor the Central Bank of Ireland can intervene in the provision or pricing of insurance products, as this is a commercial matter that individual companies assess on a case-by-case basis.This position is reinforced by the EU framework for insurance - the solvency Il directive.

With regard to the request from the Senator, I do not believe that this change is necessary, either in relation to insurance or the CAT legislation. In Ireland, I understand that the general practice where a parent wishes to prevent his or her child from having an inheritance tax liability is that the parent may take out a specific type of life assurance cover, generally referred to as section 72 cover, to which the Senator referred to Generally, the parent takes out life assurance for the purpose of covering any future inheritance tax liability on behalf of his or her child, rather than the children taking out a policy in respect of their parents. Section 72 life assurance policies are particular types of life assurance policies, which are approved by the Revenue Commissioners under section 72 of the Capital Acquisitions Tax Consolidation Act 2003. This legislation provides for a relief on the proceeds of certain life assurance policies used to pay inheritance tax. These policies are widely available in the market. They are generally whole-of-life assurance policies and will provide that the proceeds are tax free insofar as they are used to pay an inheritance tax bill.

For completeness, the Department also consulted with the Revenue Commissioners on the Senator's query as it may have inheritance tax law implications. As proposed by him, their view is nothing in CAT legislation prevents a child from taking out life cover in respect of his or her parents for the specific purpose of paying inheritance tax after the death of a parent or parents. However, the concept of insurable interest would be relevant as the child would have to prove to the insurance company that he or she has a financial necessity for such a policy. I recall that the principle of insurable interest in insurance legislation was recently modernised under the Consumer Insurance Contracts Act 2019. Accordingly, the introduction of this Act is a significant development in insurance law for consumers, which, among other things, reforms the contractual relationship between consumers and insurers.

In summary, I do not believe there is a need to examine the feasibility of changing legislation in this regard. It can be dealt with as proposed in the Senator's matter.