Inheritance Tax Guide for Cohabiting Couples in Ireland

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Are you a cohabiting couple in Ireland wondering about the complexities of inheritance tax?

While inheritance tax laws may seem straightforward for married couples, the rules can pose challenges and disparities for unmarried partners sharing a household.

In this blog, we’ll explore the implications of inheritance tax for cohabiting couples in Ireland and offer some guidance on how to manage this aspect of financial planning.

What is Inheritance Tax?

Inheritance tax, also known as Capital Acquisitions Tax (CAT), is the tax you have to pay on the assets left behind when someone dies. 

These assets can encompass a wide range of possessions, including money, property, pensions, and personal belongings. 

The tax you owe depends on how much all the assets in the estate are worth.

You are allowed to receive gifts and inheritances up to a specified threshold over your lifetime before becoming liable for Capital Acquisitions Tax. 

CAT – Group Thresholds

The Capital Acquisitions Tax (CAT) amount you must pay depends on your relationship with the individual providing the benefit. There are three distinct groups.

Current CAT thresholds (from 9 October 2019)

What is the threshold applicable to cohabiting couples?

Unlike married couples or civil partners, cohabiting couples in Ireland do not have the same legal rights and protections when it comes to inheritance tax. 

While gifts and inheritances are tax-free for spouses or civil partners, cohabiting couples are subject to the thresholds for Capital Acquisitions Tax (CAT).

In the eyes of the law, unmarried partners are treated as strangers for the purposes of inheritance and gift tax.

The inheritance tax threshold for cohabiting couples is €16,250. Any inheritance over €16,250 is subject to 33% tax.


Let’s consider Aoife and Sean, a cohabiting couple residing in Ireland. 

Sadly, Sean passes away, leaving their jointly owned house, valued at €400,000, to Aoife. 

As unmarried partners, Aoife is classified as a “stranger” for inheritance tax purposes, falling under Group C. 

The inheritance tax threshold for Group C is €16,250, and any amount above this threshold is subject to a tax rate of 33% under Capital Acquisitions Tax (CAT). 

Therefore, Aoife would need to pay inheritance tax on the value of the house exceeding €16,250 at a rate of 33%.

  • Total value of the house: €400,000
  • Inheritance tax threshold (Group C): €16,250
  • Amount exceeding the threshold: €400,000 – €16,250 = €383,750

Now, we need to calculate the tax payable on the amount exceeding the threshold at a rate of 33%:

Tax payable = €383,750 × 33% = €126,637.50

Aoife would be required to pay €126,637.50 in inheritance tax on the house inherited from Sean.

This example serves for illustration purposes only. Your situation could be more complex. We advise you to consult one of our financial advisors at True Wealth for the most accurate information tailored to your unique circumstances.

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Can I leave assets to my cohabiting spouse in my Will to avoid paying inheritance tax?

Even if your partner leaves you something in their will, you’ll still be taxed as a stranger when it comes to inheritance. 

Cohabiting partners pay 33% tax on gifts or inheritances over €16,250.

While creating a will does not exempt the surviving partner from paying inheritance tax, it remains a critical step for cohabiting couples due to their lack of automatic rights to a share in their partner’s estate. 

Inheritance planning is crucial, especially for unmarried couples. Establishing a valid will is vital for cohabiting couples to guarantee that their assets are distributed according to their wishes. 

Can I inherit my cohabiting partner’s pension tax-free if they pass away?

Your pension policy might stipulate a lump sum or pension to be disbursed to a designated individual upon your death. If applicable, you may nominate your cohabiting partner as the beneficiary.

However, some policies restrict benefits only to a spouse or civil partner. In such cases, your cohabiting partner will not have any entitlements.

Check your pension rules to know what steps to take. Alternatively, reach out to one of our financial advisors at True Wealth. We’re here to assist you with retirement planning as well as inheritance planning.

Discover insights by exploring our article: What Happens To Your Pension Plan When You Die?

If I die, can my cohabiting partner inherit our family house tax-free?

If a surviving partner in a cohabiting relationship inherits the family home, they might face inheritance tax unless they qualify for an exemption based on dwelling house criteria.

Dwelling House Relief is a tax relief designed to ease the financial burden of property taxes, especially for individuals facing difficulties in fulfilling these obligations.

Check out our article to discover the requirements for qualifying for Dwelling House Relief.

Are there alternative ways to avoid the tax burden on inheritance for cohabiting couples?

There are some potential strategies for cohabiting couples to mitigate the tax burden on inheritance:

“Life of Another” Insurance Policy

Taking out a life insurance policy can provide funds to cover any inheritance tax liabilities upon death, ensuring that beneficiaries receive the intended inheritance without financial strain.

However, if your cohabiting partner is named as the beneficiary of your life insurance, they would be liable for inheritance tax under threshold group C, set at €16,250, because, in the eyes of the law, you’re only strangers to each other. Any inheritance exceeding this threshold would be taxed at a rate of 33%.

In order for the surviving partner to receive the payout, cohabiting couples need to choose a particular form of life insurance known as “Life of Another.” 

Under this arrangement, each partner takes out individual policies on the other, which are held separately and are exempt from inheritance tax obligations. 

For instance, consider the unmarried couple, Sarah and Alan.

  • Sarah secures insurance for €300k, and Alan covers the premiums from his bank account.
  • Alan obtains insurance for €300k, with Sarah paying the premiums from her bank account. 

By doing so, the surviving partner will receive any payout tax-free as they are the beneficial owner of the policy.

Section 72 Life Insurance Policy

Alternatively, partners can consider the “Section 72” solution, where each individual takes out a separate Section 72 life insurance policy to settle any inheritance tax obligations. 

The proceeds from these policies are exempt from inheritance tax if used specifically for paying the tax owed. 

This approach can be especially relevant for covering any tax liabilities related to the couple’s primary residence.

Plan Inheritance Early With True Wealth

Planning your inheritance with True Wealth ensures a secure and prosperous future for your loved ones. 

By consulting one of our experienced financial advisors, you take the crucial first step towards effective inheritance planning.

Gain further insights on how to avoid gift and inheritance tax in Ireland by reading our article.

We at True Wealth are experts in personal and business financial planning, retirement and pension planning, pension tracing, savings and investments, protection, mortgages, and wealth management.

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All our content has been written or overseen by a qualified financial advisor. However, you should always seek individual financial advice for your unique circumstances.

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