Inheritance Tax – Unmarried Couples

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My partner and I have lived together for the past two years. I own the house where we live. My partner recently told me that he made a will and he is leaving his entire estate to me. He is not particularly wealthy but I understand he has a large life insurance policy. I don’t want to sound ungrateful but if my partner passed away would I be left with a very large inheritance tax bill? 

A person is entitled to receive a gift or inheritance up to a certain value without being liable for inheritance tax which is also known as Capital Acquisition Tax. The amount of tax payable depends on the amount of the gift or inheritance and the relationship between the parties.For tax purposes the relationships are categorised into three different groups namely Group A, B and C.

Group A applies where the beneficiary i.e. the person receiving the gift or inheritance is a child of the person giving that gift or inheritance (disponer). This includes a stepchild and an adopted child. It may also include a parent, foster child, and a favourite niece or nephew in certain limited circumstances.

Group B applies where the beneficiary is a grandparent, grandchild, great-grandchild, brother, sister, aunt, uncle, nephew or niece of the disponer. A parent who does not qualify under Group A will fall into Group B.

Group C applies to any relationship not included in Group A or Group B.

The amount that can be received tax free is known as the threshold. The current threshold for Group A is €320,000, Group B is €32,500 and Group C is €16,250. A gift or inheritance up to the threshold amount does not attract Capital Acquisition Tax. A gift or inheritance above the threshold amount will attract tax of 33% on that amount in excess of the threshold.

If you receive a gift or inheritance from your spouse or civil partner, you are exempt from Capital Acquisitions Tax. Unfortunately, the same exemption does not apply to partners living together. Therefore, if you are living with someone and not married or in a civil partnership then you will only be able to inherit up to €16,250 from your partner tax-free. The remainder will be taxed at 33%.

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