Taxed on insurance payout

[Some Day]

My recently deceased husband had two very small pension funds with one Insurance company in the form of Life Policies that would have paid out when he reached 65. As his widow they were paid out to me on his unexpected death. However I was fairly stunned to find the cheque was less that half the value of the policies after Tax, USC and PRSI. I thought inheritance for spouses carried little tax penalty. Have I got this wrong?

 

[Conan]

This does not make sense.
If they were Pension Policies (Personal Pensions or Executive Pensions) and your husband died before reaching retirement age then the value should have been paid to his estate without any tax deduction (and then distributed according to his Will). So if you inherit from the estate, then there is no tax liability on transfers from husband to wife.
You need to query this with the Life Assurance Co.

 

[Steven Barrett]

I don't understand this.

Had your husband retired? I'm thinking that he had purchased an annuity and there was still a guaranteed period on it, so the life company paid the net present value of it to you instead of paying it for the rest of the term. Or it was an ARF and you elected to cash it in instead of transferring it to your own name.

But they are just guesses. I don't have enough information to give you advice on this matter. You're best off ringing the life company and asking why the tax was deducted. Post what they said and we can see if we can shed any light on it for you.

Steven
www.bluewaterfp.ie