If you have a life insurance policy in Ireland, you may be wondering whether your proceeds will be taxable. Your life insurance policy can provide a lump sum to be paid to a specified person upon your death. Therefore, you can appoint your partner as the beneficiary. However, depending on your relationship with this person, they may not be exempt from paying tax on the proceeds.
In this article, I will outline whether having life insurance in Ireland will result in your proceeds being taxable.
Do I need to pay tax on life insurance proceeds in Ireland?
Whether or not your beneficiary must pay tax on life insurance proceeds depends on their relationship status with you. So, if an individual is married or in a civil partnership with the insured person, they are exempt from paying tax. However, if they are not married, then in the eyes of Irish Revenue, they do not have a relationship. In fact, they are treated as strangers for tax purposes. Even if they are a cohabiting couple, they still do not have the same entitlement as married couples.
Your life insurance policy will specify whether only a spouse or civil partner will benefit from the tax exemption. It is always best that you check with your insurer to fully understand the conditions of your policy.
How much tax will I pay on life insurance proceeds in Ireland?
In light of this information, you may have just discovered that your relationship status affects your tax exemptions for your partner’s life insurance. If you are not married to your partner, you may be wondering how much tax you will pay. Currently, the proceeds of life insurance in Ireland are taxed based on the Inheritance and Gift Tax rate. Inheritances in excess of €16,250 are taxed at 33%. Therefore, you will receive €16,250 tax-free and you will pay 33% on the balance.
Should I get life insurance?
Now that you understand how your relationship status influences whether you will pay tax on life insurance proceeds, you may be wondering whether you really need life insurance. As mentioned, life insurance policies will pay money to your partner following your death. Therefore, if your partner is financially dependent on you, you should start considering your life insurance options. Ready to learn more? With Best Insurance Quotes, you can get a life insurance quote today in under 30 seconds.