Ronan’s Monthly Blog – Inheritance

Special Needs Trust – Whole of Life Cover – Trusts

This summer we were delighted to be asked to present a specific concept and options to the South East branch of the Down syndrome association.We highlighted the nature of combining life assurance cover in conjunction with a special needs trust for the dependent child. In conjunction with a local legal firm, our presentation illustrated the need to establish the trust in order to make sure that each child will not be exposed to any reduction or elimination of their statuary payments from benefit allowances. Each parent will of course realise the need to provide for their child in the event of an untimely death.The structure of the trust and a whole of life insurance contract needs to be put in place to ring fence funds that may be required in the future for issues that may arise. Your dependant child could want education options, housing alterations, helper assistance etc etc. The trust and its trustees will provide for same with the additional funds coming from the life assurance policy. Since the individual dependent child would not inherit the funds into their account or estate, the trust takes the funds and the trustees of said fund act in a prudent and honest fashion in appropriating the funds as to the needs of the child in the future. It’s not complicated but most families do not set the concept up correctly, some putting the life assurance in place without the trust.
The life assurance contract can be written on a single, joint life or joint life second death bases. Remember, you should have a traditional convention Whole of Life contract. There are new developments in the market where one specific provider gives the policy holder three choices

1. To simply maintain the original cover and payments
2. To stop payments after 15 years and protect the cover at that stage
3. To take a refund of 70% of the premiums paid after 15 years
The idea here is that your situation may change, and these options may prove attractive after 15 years.

What happens to my AMRF/ARF when its passing to my children in an inheritance situation???

When you come to retirement age and your pension options are outlined to you, the choice you make should take in the following considerations,

1. Am I interested in a pension annuity and does the rate provided give a realistic income.
2. Does the alternative of investing in approved retirement funds and taking income from these funds in retirement look more attractive.
3. The AMRF/ARF route may also provide more flexibility as you can transfer to an annuity in retirement which would automatically attract a higher rate on your annuity.

Both need to be assessed as each individual’s situation at retirement is different. However, with annuity rates being low, a lot of clients have preferred to place their retirement funds (after taking their tax-free sums) into approved funds. This allows these funds participate in potential market returns and in a way stagger their investment retirement income. Most clients would agree that from an estate planning and inheritance planning stand point, the AMRF/ARF route is more attractive. In this instance the fund will pass to your spouse but of course income from same will accrue tax on draw down in the normal way. The annuity route means reducing rates even further if you place guaranteed periods into the contract or indeed (as with most cases) have the income paid to the longest survivor.

In terms of passing on the funds in an AMRF/ARF, normal rules apply. Inheritance tax on the fund will click into place, with an immediate tax of 30% applying to the fund for any children with a parent with such a pension vehicle investment. There is a solution. Insure the liability by means of a Whole of life insurance policy, under section 72 of the finance act. The holder of the AMRF/ARF takes out this policy and assigns it to Revenue for the expected liability. The average cost that we see with our clients is between €4000 and €6,000 p.a depending on the size of each individual fund.In some cases, clients cater for this expense by increasing their annual income drawdown. Remember a fund of €250,000 would attract a tax bill of €75,000. Reducing the fund to €175,000. Something to think about?

Please do contract me on 087 -2765147 to discuss further.


In summary, if you have placed some retirement funds in an AMRF/ARF and want to protect the asset transfer to your children, Whole of life section 72 contracts will protect same. Families that need to assess the protection of funds and assets for their children with special needs, the solution can be the establishment of a special needs trust in conjunction with the correct life assurance contract. As financial brokers with impartial expertise on Pensions, life assurance and investments, please do contact us and avail of our services, we will be delighted to help. (087/2765147)

Cheers Ronan

Next time with Pension season on the way let’s take a look at the proposed government auto enrolment pension concept for 2022 and other pension topics that may be of interest.