Approx. 1 in 10 people are co-habiting in Ireland. Are you one of them?
Assets passing on death between married couples are exempt from Inheritance Tax. Did you know this only applies in the case of “legal spouses” or “registered civil partners”. All other couples, even qualified cohabitants, are treated as strangers for Inheritance Tax purposes.
The stranger threshold for Inheritance Tax is currently €16,250 (2020). Inheritances in excess of €16,250 are subject to tax at 33%. Source: Capital Acquisitions Tax Consolidation Act 2003 (as updated) 12th October 2016.
Let’s take an example:
Mary and John have lived together for 10 years. They have never married. They have two children. Their assets are as follows:
- Family Home – jointly owned €450,000
- Life Assurance – dual life €500,000
- John’s Company pension €240,000
- Apartment in Turkey € 80,000
- Various savings and investments € 50,000
|If John dies Mary inherits as follows:||If Mary dies John inherits as follows:|
|½ Family Home||€225,000||½ Family Home|| €225,000|
|½ Life Assurance||€250,000||½ Life Assurance||€250,000|
|John’s pension||€240,000||Mary’s pension||€0.00|
|½ Apartment||€ 40,000||½ Apartment||€ 40,000|
|½ Savings||€ 25,000||½ Savings||€ 25,000|
|Less threshold||€ 16,250||Less threshold||€ 16,250|
|Taxable at 33%||€763,750||Taxable at 33%||€523,750|
|Mary’s Tax bill||€252,037||John’s Tax bill||€172,837|
This example is provided for illustration purposes only. Subject to underwriting criteria, terms and conditions apply.
Will you have to pay inheritance tax on the death of your partner?
If you think this affects you we would invite you to contact our Financial Advisors with a view to reviewing your family and mortgage protection arrangements to ensure that you and your family receive the proceeds of your life assurance policy when you need it most in the most tax efficient way possible.