Inheritance tax considerations for couples

Ireland in 2026 is very different to that of 20, 30, or 40 years ago. Back then, couples married relatively early, bought their first property together, had children, and so on - a very defined linear lifepath. Nowadays, things are not the same. There is an increasing number of couples who have bought property, started families - with little or no intention of marrying or recognising a civil partnership. Known as ‘co‑habiting couples’, they represent one of the fastest‑growing family types in Ireland₁, yet there is an unintended tax consequence of this - they face a tax landscape very different from that of married couples or registered civil partners.

This gap is increasingly relevant: Census 2022 figures show a significant rise in co‑habiting families, with growth outpacing that of married couples₁. Meanwhile, the average age of marriage continues to rise - now 37.7 for men and 35.8 for women₂ - and in many cases couples are buying property together before they marry. This means many partners are financially committed long before they are recognised as a couple for tax purposes. While the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 clarified some legal protections, it did not extend the tax advantages enjoyed by married couples.

Why co‑habiting couples face a higher inheritance tax exposure

For tax purposes, co‑habiting partners are treated very differently from married couples or registered civil partners. They fall into Group C for Capital Acquisitions Tax (CAT) - the lowest inheritance tax allowance, currently €20,000. Anything inherited above this amount can be taxed at 33%, and unlike married couples, co‑habitants cannot transfer assets to each other tax‑free during life or on death.

This means that everyday financial decisions - buying a home together, taking out life insurance, or even pooling savings, can create tax liabilities that many couples do not anticipate. As more people purchase property before marriage, potential exposure to CAT is becoming a practical issue rather than a theoretical one. Understanding how life cover and other protection options work with these rules can help couples avoid unexpected tax bills.

Mortgage protection: When it does and doesn’t trigger tax

When a co‑habiting couple takes out a mortgage, the accompanying mortgage protection policy is generally assigned to the lender. In this scenario, the benefit is paid directly to the bank. The surviving partner never receives the proceeds, nor are they personally entitled to the money. As a result, no inheritance tax arises, provided the full policy benefit is used to clear the mortgage.

However, complications arise when the sum insured is larger than the outstanding balance. Any excess paid back to the surviving partner is treated as an inheritance and therefore may be liable to CAT. If the policy isn’t assigned at all, the entire benefit is treated as an inheritance - creating a much larger exposure.

Covering other assets and income

Beyond the mortgage, many couples have shared assets - from savings to cars to death‑in‑service benefits (life insurance provided through your workplace). Because co‑habitants do not enjoy the tax‑free treatment afforded to spouses, these assets can quickly push the surviving partner above the €20,000 threshold.

A further complication arises when assets are not jointly owned. Under the default inheritance rules under Irish law, a co‑habiting partner is not automatically entitled to inherit if the deceased dies without a valid will. In such cases, solely owned assets may not pass to the surviving partner at all, leaving them excluded from the estate and potentially without access to funds they relied upon. Even if certain assets do transfer, the survivor may still face a CAT liability, compounding the financial difficulty.

When a home is owned under joint tenancy, the surviving partner automatically inherits the deceased’s share. Unless the Dwelling House Exemption applies, this can create a significant tax burden at a time of emotional and financial strain. The exemption is useful but strict: the survivor must have lived in the home for at least three years prior to the inheritance, have no interest in another property, and continue to occupy the house for six years afterward. For couples buying a first home and planning to marry later, that three‑year rule is often the stumbling block.

Using life insurance to bridge the gap

A short‑term protection policy-typically three to four years - may help cover a potential tax liability until the couple’s circumstances change, for example if they marry or qualify for an exemption over time.

In these situations, a Life‑of‑Another arrangement is often the simplest and most tax‑efficient option. Each partner takes out a policy on the other’s life and pays the premiums themselves. In the event of a claim, the benefit is not considered an inheritance, because the policy owner has effectively “paid for” the cover themselves.

A financial adviser can help ensure this type of policy is set up correctly and aligned with the couple’s wider financial needs. This can allow funds to be used to cover income loss, childcare costs, or potential tax bills without triggering inheritance tax.

Building a life together? Here’s what you need to know about taxes and protection

Many couples now share their finances before tying the knot. But current taxation may leave partners who live together at risk of unexpected costs. Therefore, it’s important to understand your situation and know where you stand.

By spotting potential tax issues early and setting up the right protection, you can turn worries into long-term financial security. With help from advisers, you’ll have the confidence to protect what matters most and enjoy peace of mind as you build your future (home) together.

The information contained herein is based on Zurich Life’s understanding of current Revenue practice and may change in the future.

Sources:

₁Central Statistics Office – Census of Population 2022: Families and Households (Profile 3).

₂Central Statistics Office – Marriages 2023: Key Findings.