It was the same-sex marriage that had everyone talking – two men married, not for love but to beat the inheritance tax.
The story of the two best friends who tied the knot over money matters caused furore when it came to light, but Matt Murphy and Michael O’Sullivan always insisted theirs was a true love story.
And it was told on RTÉ One television on Monday night.
The two arranged that Michael would move in and care for Matt in his Dublin home, a win-win for them both. But when Matt, who died in January last year, offered to leave the modest house to his friend, Michael realised he would not be able to pay the inheritance tax of up to €100,000. So one of their friends suggested that the two should get hitched Provided by Extra.ie
But why did that friend suggest that they get married?
The current rate of inheritance tax in Ireland in 2020 is 33%.
Inheritance Tax is a tax charged on money or property that is gifted to, or inherited by, someone. The recipient is responsible for the tax on the gift or inheritance. Some people refer to it as the Gift Tax.
This tax applies to all property that is located in Ireland.
However Inheritances or gifts under certain thresholds are tax-free.
There are 3 different threshold levels (groups) depending on the relationship between the recipient and the donor (disponer) of the gift or inheritance.
The group A threshold was increased in Budget 2020 – the threshold levels below are valid from October 9th 2019 onwards.
Group A: Tax-free threshold
Group A threshold is €335,000 this applies where the beneficiary is a…
- child (including an adopted child, stepchild and certain foster children) OR
- Minor child of a deceased child of the disponer (donor).
- Parents also fall within this threshold where they take an absolute inheritance (full and complete ownership) from a child.(not a gift) and the inheritance is taken on the death of the child. Otherwise, parents fall into Group B.
The Group B tax-free threshold is €32,500. This applies where the beneficiary is a …
- brother, sister,
- nephew, a niece
- lineal ancestor or lineal descendant of the disponer (eg grandchild).
Group C tax-free threshold is €16,250 and it applies in all other cases. This includes cousins, great nephews/ great nieces, non-relatives.
So now we understand why Michael & Matt got married, as any inheritance or gifts made between spouses are tax free. However, there are other ways of avoiding Inheritance Tax in Ireland
- Any inheritance or gifts made between spouses ae tax free
- The first €3,000 of all gifts received from a benefactor in any calendar year( You could set up a saving’s Plan)
- Any Inheritance received from a deceased child which had been given to the child as a gift by the parent
Capital Acquisitions Tax Consolidation Act 2003 grants a relief in relation to the proceeds of life insurance policies which would otherwise be liable to inheritance tax on the death of the insured person.
Section 72 provides that the proceeds of any qualifying insurance policy taken out under this section by the insured person on his/her own life will be exempt from inheritance tax insofar as such proceeds are used to pay the inheritance tax on the benefits received on the insured person’s death, or within a year of his death.
Simply, under section 72 the proceeds of a life insurance policy are used to pay the inheritance tax liability on the benefits received on the death of a person.
Further information on Capital Acquisitions Tax can be obtained from
Frank Ryan Financial Services