Inheritance Tax & Cohabiting Couples

Inheritance Tax & Cohabiting Couples – The Facts:

  • Assets passing on death between married couples/civil partners are exempt from Inheritance tax BUT this exemption only applies in the case of ‘Legal Spouses’/Civil Partners
  • ALL other couples are treated as strangers from an Inheritance Tax point of view where the threshold is currently only €16,250 Inheritances in excess of this are subject to tax @ 33%

Lets look at an actual example:

family inheritance tax

  • James & Kate have lived together for the past 15 years
  • They have 2 children and have never married

They have the following assets:

Jointly Owned Family Home€350,000
Life Assurance - Dual Life€300,000
James's Pension€280,000
Kate's Pension€100,000
Apartment in Dunmore East€70,000
Various Savings & Investments€80,000


If James dies, Kate inherits as follows:

1/2 Family Home€175,000
1/2 Life Assurance€150,000
James's Pension€280,000
1/2 Savings €40,000
1/2 Apartment€35,000
Less Threshold:€16,250
Taxable @ 33%=€663,750
KATE'S TAX BILL = €219,037

If Kate dies, James inherits as follows:

1/2 Family Home€175,000
1/2 Life Assurance €150,000
Kate's Pension€100,000
1/2 Savings€40,000
1/2 Apartment€35,000
Less Threshold:€16,250
Taxable @33%= €483,750
JAMES'S TAX BILL=€159,637.50


If this is your situation, here are some ways to reduce your tax bill.. read on:

Family Home: 

  • You may be able to avail of an exemption on your family home, provided certain conditions are met. To qualify for this exemption, the person who inherits the home must:
    • Have occupied the house as their sole/main dwelling for 3 years prior to the date of the inheritance
    • Not hold an interest in any other dwelling at the date of inheritance.
    • Continue to occupy the house as their sole/main residence for 6 years after the date of the inheritance.

If these conditions are not met, there could be significant tax implications for the survivor

Life Cover:

  • Specific Life Assurance can provide you with the funds to cover your Inheritance Tax Bill, in the example above, Kate’s tax bill is: €219,037
  • Solution
    • Kate takes out a life policy with life cover on James’s Life
    • Kate pays the premiums from her bank account
    • James dies and the €219,037 is paid directly to Kate, as she is the legal owner of the plan
  • Kate has no liability to Inheritance Tax or the plan proceeds as she was both the person who received the death benefit and the person who paid the premiums
  • Kate can use this money to now pay the Inheritance Tax liability she will have on James’s death


You should regularly review your family and mortgage protection arrangements to ensure that they are set up in the most tax efficient way possible

Should you wish to discuss further, please click Request Callback or Contact Us at the top of this page, or click here

Thanks for reading,







Karen Cantwell, 8.10.2018 | Posted in News