Will you have to pay Inheritance Tax on the death of your partner?

Why is this statement so importnant today........well 1 in 10 people are cohabiting in Ireland! Are you one of them?    

Assets passing on death between married couples or civil partners are exempt from Inheritance Tax. But this only applies in the case of "LEGAL SPOUSES" and same sex registered civil partners. All other couples are treated as strangers for Inheritance Tax purposes.

So what you might say! 

The stranger threshold for Inheritance Tax is currently €16,750. Inheritances in excess of €16,750 are subject to tax @ 30%.

So, on the death of a non married partner Inheritance Tax will be payable on the total value of all assets, regardless of how long the couple have lived together. With the possible exception if the family home, where a 'co-habiting partner' inherits other property, or a death benefit under an insurance plan, the €16,750 threshold could easily be exceeded!

Consider the following,

James Brown and Mary Smith take out "Dual Life" Cover of €100,000
James and Mary are joint owners, and pay premiums out of their joint account.
James dies and the €100,000 is paid to his partner Mary Smith because she is the surviving plan owner. 

Assuming Mary inherited no other assets and the Revenue agree that she has paid 50% of the premiums she will be taxed on 50% of the benefit.

So, her taxable inheritance is €50,000.
Threshold €16,750 exempt
Balance €33,250 taxed @ 30% = €9,975.

Mary's liability to Inheritance Tax on the plan proceeds is €9,975

If you think this affects you we would invite you to contact Alasdair at 01 810 1912 or via info@agsfinancial.ie to review your family and mortgage protection arrangements to ensure that you and your family receive the proceeds of your life assurance plan when you need it most in the most tax efficient way possible. 

We advise that you seek professional legal and tax advice as the information given is a guideline only and does not take into account your personal circumstances. The example included is for guidance purposes only and is not based on any real individual circumstances and should not be constituted as advice in any particular instance.