Insurance indemnities are subject to inheritance tax or income tax
If an insurance company pays you an indemnity relating to a life insurance contract or to an individual retirement contract, etc., you must enter the amount you receive in the deed of estate inventory. You must pay inheritance tax or income tax on such an indemnity, depending on the type of insurance contract and depending on whether you were the decedent’s close relative.
The insurance company’s decision to pay you the indemnity contains important information on how your indemnity income will be taxed. Take the letter from the insurance company with you to the meeting where the inventory of the estate is drawn up.
If you are not informed of the insurance indemnity until after the deed of estate inventory has been sent to the tax office, you must send us a photocopy of the insurance company’s decision later. Send the document to the same address where the deed of inventory was delivered.
Insurance indemnities may sometimes be paid to the estate itself, not to the surviving heirs.
How to list an insurance indemnity in the estate inventory deed
Add a new heading to the deed of estate inventory, such as “Insurance indemnities received because of the decedent’s death”.
Enter the following information:
- the clause of the insurance contract on who the beneficiary of the insurance is
- the recipient of the indemnity
- the insurance company that paid the indemnity
- policy number or other details for identification of the policy
- the amount
- the date of payment (if known at the time when the estate is inventoried)
Do not list the insurance indemnity under the deceased person’s assets in the deed.
Enter the indemnity under the deceased person’s assets in the estate inventory deed.
The deed must also contain the following information:
- Indicate that the indemnity was paid to the estate.
- State the name of the insurance company that paid the indemnity,
- The policy number or other details for identification of the policy or contract,
- The amount,
- The date when the insurance company pays the indemnity to the estate, if it is known when the estate is inventoried.
Further guidance for different types of insurance contracts and for received financial support
Specify the following in the deed of estate inventory, in addition to the above:
- Indicate that the received indemnity is based on individual retirement pension insurance.
- Indicate whether the contract was signed before or after 18 September 2009.
- If the insurance contract was signed on 18 September 2009 or later:
- State whether the received indemnity is a higher sum of money than the paid-in savings under the pension insurance contract.
- Specify the amount that goes over the paid-in savings.
- List the income tax payable on the insurance indemnity under the estate’s debts. The rate of income tax is 30%, but for any part exceeding €30,000, the rate is 34%. Enter the full amount of the received indemnity without deducting the tax withheld on it.
Specify the decedent’s debt to be covered by insurance in the deed of estate inventory. In most cases, a received insurance indemnity will cover the entire debt balance. If the entire debt is covered, you do not have to include the debt in the decedent’s debts.
Inheritance tax must be paid on
- an amount of money received as burial assistance, if it is based on a group life insurance contract or similar
- financial support comparable to insurance indemnities received from an employees’ group life insurance contract and paid by the state, a municipality, another corporate entity under public law, or by a pension insurance company.
If a death estate receives assistance or support as described above, you must additionally enter the following information in the deed of estate inventory:
- The payer of the financial support,
- The recipient,
- The grounds for the financial support,
- The amount,
- The date when it is received.
If a municipality or a church pays the amount received as burial assistance, you do not have to include it in the deed, and no inheritance tax will be collected on it.
The property that belongs to the surviving spouse includes all the insurance contracts held by him or her, valuated on the decedent’s date of death. Any income-tax debt relating to the contract can be deducted from the total contract value.
Enter the value of the insurance contract as an asset belonging to the surviving spouse. Use the value it had on the decedent’s date of death. To check the insurance contract’s value at the date of death, see the letter you received from the insurance company.
You must additionally list any capital-redemption contracts, i.e. investment contracts, held by the surviving spouse, valuated at their current values on the decedent’s date of death.