Policies issued under Section 60 F.A. 1985. As amended by Section 84 F.A. 1989.

Proceeds of policies of life assurance issued under the above sections are exempt from inheritance tax when they are payable in connection with the death of the life assured.

From on and after the 30^th May, 1985, it became the practice to issue two contingent policies in the case of a husband and wife, each life insured to survive the other. Since the 24^th May, 1989, the same cover was available under a joint life and life of survivor policy, whereby the proceeds became payable on the death of the survivor, who was then deemed to be the disponer of the proceeds.

The standard Will, and that recommended by the Law Society, in the case of a husband and wife contains a fixed period (28 days/30 days) survivorship clause. In the event of that clause becoming effective by the surviving spouse dying within the period, the exemption benefit of a Section 60 Policy is lost because the claims for tax will arise under the Will of the first spouse to die, as disponer, while the proceeds are payable on the death of the survivor, the deemed insured and disponer in respect of those proceeds - the exempting connection is broken.

For example:- H & W by their identical Wills leave everything to each other provided the other survives 30 days with a giftover to their only child, C absolutely. They put in place a joint (or contingent) policy under the provisions of Section 60 F.A. 1985 as amended to cover the tax exposure on the death of the survivor. They are involved in a car accident. H dies on the 28^th day of February and W dies on the 28^th day of March.

H's estate = £350,000

W's estate = Nil

Policy Cover = £74,000

By reason of the death within 30 days, the provisions of H's Will take effect and the proceeds became payable on W's death and pass under her will. There is, accordingly, no exemption.

Inherits:-

From H £350,000 Tax £74,000

From W £74,000 Tax £40,700

C has lost £40,700 by reason of the events.

This problem dates back to the 30^th May 1985 and strong representations will be made to the Government and the Revenue Commissioners for amending legislation back-dated to the 30^th May, 1985. In the meantime, solicitors should take account of the dangers in all future Wills and policies.

With regard to past Wills and Policies, solicitors should rectify the position by correcting the Wills in case the representations do not bear fruit.