Life insurance, pensions and cohabiting couples in Ireland
- Life assurance and pensions
- Tax implications of cohabiting
- Check your insurance policies
- Further information
Life assurance and pensions
A cohabiting couple is a couple that lives together in an intimate and committed relationship, who are not married to each other and not in a civil partnership. Cohabiting couples can be opposite-sex or same-sex.
Your life insurance or pension policy in Ireland may provide for a lump sum, or pension to be paid to a specified person on your death or retirement. In this case, you may be able to nominate your cohabiting partner as the beneficiary.
However, many policies specify that only a spouse or civil partner may benefit. Where a policy specifies that only a spouse or civil partner may benefit, your cohabiting partner will not have any entitlements.
Likewise, you may be entitled to a supplement to your pension in respect of a spouse/civil partner, but not in respect of a cohabitee (your partner).
If you are a 'qualified cohabitant' under the Redress scheme for cohabiting couples, you may apply for provision out of your partner's estate if they die, but you will still have to pay Inheritance Tax on anything you receive as a result of that application.
Check with your insurer or the trustees of your pension, or your life insurance provider, if you want to be sure about the conditions of your particular policy. If you are not married or in a civil partnership, you should see if your policy can be changed to allow your partner entitlements that they would not otherwise have.
Tax implications of cohabiting
All benefits passing between married couples and civil partners are exempt from Inheritance and Gift Tax. However, cohabiting couples have no such entitlement.
Cohabiting couples are treated as strangers for Inheritance and Gift Tax purposes. The stranger threshold for Inheritance Tax is currently €16,250. Inheritances in excess of €16,250 are subject to tax at 33%.
Check your insurance policies
A life insurance policy can provide money for dependants if you die. There are different types of cover including single cover and joint cover. The CCPC has detailed information about life insurance.
Life cover or life insurance is a way of ensuring any debts can also be paid off by your partner if you die. It can cover items such as a mortgage, credit cards, personal or car loans, and costs arising from your funeral.
If you are living with your partner but you are not married, whether or not Inheritance Tax will be paid on any payout from the life cover policy in the event of one of you dying will be decided by two things:
- Who will receive the policy proceeds on death (the beneficiary)?
- Who paid the premiums on the policy?
If the beneficiary did not pay the premiums, or if the beneficiary is not the legal spouse or registered civil partner of the person who paid the premiums, the policy proceeds are likely to be liable to Inheritance Tax.
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John Brown takes out "Life Cover" of €100,000 on his own life and pays the premiums by direct debit from his own bank account. John dies and based on the terms of John’s will the €100,000 is paid to his cohabitant partner Mary Smith. Assuming Mary inherited no other assets, the liability to tax is on the full benefit from the Life Cover policy. |
Mary’s taxable inheritance is €100,000. Threshold €16,250 exempt. Balance €83,750 taxed at 33% = €27,637
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John Brown and Mary Smith take out “Dual Life Cover" of €100,000. John and Mary are joint owners of the policy, and pay premiums out of their joint account. John dies and the €100,000 is paid to his cohabiting partner Mary Smith because she is the surviving policy owner. Assuming Mary inherited no other assets, and Revenue agree that she has paid 50% of the premiums, Mary will be taxed on 50% of the benefit. |
Mary’s taxable inheritance is €50,000. Threshold €16,250 exempt. Balance €33,750 taxed at 33% = €11,137.
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Mary Smith takes out a “Life Policy” with Life Cover of €100,000 on John Brown’s life. Mary is the policy owner with John as the life assured. Mary pays the premiums by direct debit from her own bank account. John dies and the €100,000 is paid to his partner Mary Smith as she is the legal owner of the policy. |
Mary has no liability to Inheritance Tax as she is both the beneficiary and the person who paid the premiums. |
If you are not married or in a civil partnership, it's a good idea to have a chat with a financial or tax expert. Make sure the life insurance or mortgage protection you and your partner have is the right choice for your situation. It's important to set it up in a way that avoids any tax issues for either of you in case one of you passes away.
Further information
Insurance Ireland provides consumer information and a free Insurance Information Service (IIS) for members of the public.