Will my children have to sell the family home to pay inheritance tax?

Quite possibly – yes.  If your children inherit the family home, they may have a valuable property and very little cash to pay the inheritance tax. Whether they would have to sell depends on the size of the bill and what other money is available to pay it.

Will my children owe inheritance tax on the family home?

That depends on what each child inherits, how much of their tax-free threshold they still have available, and whether they qualify for any relief. One relief worth checking is the dwelling house exemption. It has specific qualifying conditions set out by Revenue.

What could it cost to cover a €150,000 inheritance tax bill?

Take a married couple who estimate that their children could face a combined €150,000 inheritance tax bill. Both parents are 55 next birthday and non-smokers. They look for €150,000 of Section 72 cover on a joint-life, second-death basis, so the policy is designed to pay out when the second parent dies, provided the policy is still in force. For this couple, Zurich quoted €174.56 per month. It was the lowest of the three quotes I compared for this particular setup.

What could the €150,000 cover cost overall?

For this illustration, assume the second parent dies at age 83 and the couple makes 345 monthly payments at €174.56. Age 83 is a rounded benchmark based on Ireland’s life expectancy at birth. The number of payments depends on the policy start date and when the second parent dies.

• €60,223.20 in total premiums from 345 payments of €174.56.
• €150,000 policy payout at the second death, which is €89,776.80 more than the premiums paid.
• €19,873.66 in estimated inheritance tax savings if the money spent on premiums would otherwise have remained in the estate and been taxed at 33% in the hands of the beneficiaries.

Subtract that estimated tax saving from the premiums and the effective cost of funding the €150,000 bill is €40,349.54. That’s a potential financial benefit of €109,650.46 compared with funding the €150,000 bill in full from the estate.

The €150,000 tax bill would still be payable. If the policy stays in force and the qualifying payout is used to settle the bill, it gives the children the cash they need without having to sell the family home to raise it. The effective cost will vary with the number of premiums paid and the tax that would otherwise apply.

What would it cost for your family?

Start with the inheritance tax calculator to estimate what your beneficiaries could owe. If you want to cover that amount, request a Section 72 quote and I’ll work out the cost for your circumstances. The premium depends on your age, health, smoking status, the amount of cover and how the policy is set up.