Business Insurance Donegal & Ireland

Business Insurance and the Importance of financial planning for today’s business people

Why do I need business protection? 

Anyone in business today wouldn’t think twice about insuring their business against loss from fire or theft. However, there are many other circumstances that can have damaging and lasting consequences for your business. 

Indeed, without the right kind of protection, your business, even your family’s finances, could be in financial ruin.

Business Insurance Text on Table Centre of a Donegal Business Meeting, Hands Seen on the Side

Ask yourself the following: 

  • How would your business survive if one of your key employees or shareholders became seriously ill or died suddenly? 
  • If your business partner died what would happen to their share of the business?
  • How would you feel about a shareholder’s family joining your business if he died suddenly? 
  • If you died what would happen to your share of the business? 
  • Are your spouse or children in a position to take your place in the business? 
  • How will your family survive financially?

If any of the above questions are a cause for concern you may need business protection.

Give us a call today for more advice: 074 910 3938

It won’t happen to our company! 

There is very little in life of which we can be absolutely certain, but one fact is guaranteed, we are all going to die… someday.
The one unknown, thankfully, for most of us is that we have no idea when this will be. However, the odds of one partner in a 2- or 3-man business dying or becoming seriously ill before retirement are probably a lot higher than you might think.

See states below, these are from 2010-2012 but the figures would not have gotten better. 

What’s the solution? 

Many problems can arise for a business when a partner or key employee is out of the picture due to death or serious illness. Some of these problems could be alleviated with adequate financial planning to provide the funds to allow options and choices to be made by all parties.

Arranging adequate business protection insurance is the only way to ensure that the necessary funds will end up in the right hands at the right time, and in a cost-efficient manner, to help ensure the continuity and the survival of the business.

Our expertise: 

Ensuring the survival of your business, either when you pass it on to your children or in the event of a partner dying, requires careful planning. 

Your Advice First Financial advisor can assist you with putting together an arrangement to suit your business protection needs which will help ensure the continuing success of your business. 

Types of businesses, business insurance, business taxation

The first thing to understand with respect to business protection is the different ways in which a business can be established. 

They are: 

  • Limited company 
  • Partnership
  • Sole trader

Limited company 

Once established, a limited company is a separate legal entity to the individual(s) who set it up: the shareholders.
The term ‘limited’ refers to the fact that shareholders’ liability for company debts is limited to the value of their shareholding. So, any creditors would only generally be able to claim against the company, not against the individual shareholders.


A partnership is where two or more people arrange to run a business in partnership with each other and will have a legal agreement in place. The partners are jointly responsible for running the business and if it fails all partners are jointly responsible for the debt. 

Sole trader 

A sole trader is exactly what the title states it is. It is one person who is running a business, and that individual is personally responsible for the debts of that business.

Business Insurance & Protection

The types of business that would require what is regarded as business insurance would typically be the limited company and the partnership. While standard life assurance policies are used for this type of protection, the way in which it is arranged is important.

Business Type vs Business Insurance Needs Table

Keyperson insurance 

Need for key person cover.

Key person cover is life assurance effected by an employer on the life of a key employee, who may also be a shareholder or director, to protect the company against the financial consequences of that individual’s sudden death or serious illness.

Key person cover is designed to protect the value of the company’s human assets in much the same way as fire insurance protects a company’s physical assets.

The sudden death or serious illness of a key person could give rise to a number of immediate financial pressures for a company: 

  • The ‘calling in’ of company loans, in particular any to which the ‘key person’ had given a personal guarantee. 
  • A costly interruption in business 
  • A loss of business contacts 
  • Extra resources may have to be committed to the recruitment and replacement of the key individual.

Who is a key person? 

A key person might be a business owner or an employee, whose sudden absence from the business would have a financial impact.

What can the proceeds of a key person plan be used for? 

  • The company would use these funds in any way it chooses:
    Repayment of bank loans, particularly any to which the key individual has given a personal guarantee. 
  • Repayment of any loans the key person may have made to the company
    Recruitment of a successor.
  • Investment in the business.

Gift and inheritance tax planning 

This allows you to plan in advance for any tax liability which could arise on the transfer of a business, thus ensuring the business won’t have to be sold off to pay the tax debts.

As well as providing advice on the above arrangements, your Advice First Financial advisor can assist you and your business with the following services: 

  • Review of individual circumstances 
  • Draft legal documents

Pensions Planning

A pension plan is now accepted by most working people in Ireland as a natural part of their financial planning. With increasing pressure on State social welfare benefits in recent years it is recognised that a private pension plan is necessary in addition to State benefits. 

In this way, individuals and their dependants can enjoy greater financial security. An approved pension plan is the most tax-efficient way to provide: 

  • A realistic income in old age, And / or 
  • A level of financial security for your dependants in the event of your death.

Tax advantages

A. Personal contributions

Income tax relief is available on personal pension payments between 15% and 40% of income (depending on age), subject to an earnings cap of €115,000.
For a top rate taxpayer this can result in a saving of up to 40%, or up to 20% for a standard rate taxpayer (currently).


B. Company contributions 

Any contributions by your company (subject to certain limits) to your pension plan are also allowable as a trading expense, thus generating a corporation tax saving.
Perhaps more importantly, any such contributions invested by your company for your benefit are not treated as taxable in your hands (i.e. no benefit in kind tax).

Also, a pension plan is ring-fenced from the company’s assets, and so is generally protected from the company’s creditors.

C. Tax-free investment returns

Another major tax advantage of investing through a pension fund is that approved pension funds generally pay no tax on any investment income or capital gains.

  • Dividends are re-invested gross of tax.
  • Fund grows free of Dividend Withholding Tax. 
  • Fund grows free of Capital Gains Tax obligations. 

Any Government levies due will be taken from your fund as required. The funds invested in may have to pay tax where they invest in property or other assets outside of Ireland if required by the domestic tax rules of the relevant country.

Warning: If you invest in this product, you will not have access to your money until age 60 and/or you retire.

D. Retirement lump sum 

Another tax advantage is that on retirement some of the capital accumulated in your fund can be taken out in the form of a retirement lump sum tax free.
For those who are self-employed (typically Schedule D Case I & II taxpayers) and directors and employees in a PRSA the retirement lump sum is up to 25% of the fund.

For directors and employees in defined contribution company pensions, the limit can be either 1.5 times final salary (subject to certain conditions) or 25% of the fund.
The maximum tax-free amount you can receive is €200,000. Retirement lump sums between €200,000 and €500,000 will be subject to standard rate income tax (20% as of January 2023). The €200,000 and €500,000 limits include all retirement lump sums you have received since 7 December 2005. You can use the rest of your pension fund in a number of different ways.

E. Pension income 

The remaining fund can be taken as a pension annuity guaranteed for life. Pension income in retirement is subject to income tax and other levies on withdrawal. 

Or, after taking the tax-free lump sum, you can continue to invest the rest of your pension in a fund that you can manage and control. You can do this using an Approved Retirement Fund

F. ARF (Approved Retirement Fund)

After taking the maximum retirement lump sum, you can re-invest the balance of your pension fund in an Approved Retirement Fund.
This is a personal investment fund that you can manage and control in your lifetime. You can withdraw income as required subject to a minimum withdrawal of 4% or 5% depending on your age. A withdrawal of 6% is required if your funds are over €2 million. You can leave your ARF to your dependents on your death.

Withdrawals from ARFs are subject to income tax and other levies. You can use an ARF to purchase an annuity at any stage

Our expertise 

At Advice First Financial we specialise in helping businesses and their owners plan for their future. Whether it is succession planning, pension planning providing financial security for dependants, or ensuring an income in the event of disability, we can offer solutions to meet your needs.

Personal Pension Plans and PRSAs (Personal Retirement Savings Accounts)
For the self-employed and those in non-pensionable employment.

Company Pension Plans and PRSAs
For directors and employees 

Pension Term Assurance
Lump sum and / or spouse’s pension if you die before you retire.

Debunking 7 Myths About Using a Financial Advisor 


In the ever-evolving world of personal finance, navigating your way can be a daunting task.
Many individuals find help in the guidance of a financial advisor, but there are numerous misconceptions that might make you hesitate.
Let’s unravel the truth behind seven common myths about using a financial advisor, life Advice First Financial

Myth 1: 

“I’m not wealthy enough for a financial advisor.” 

Reality: Most Financial Advisors are like Advice First in that they not exclusive to the wealthy. Whether you’re just starting on your financial journey or looking to optimize your existing assets, a financial advisor can tailor their services to your unique needs and goals.

Myth 2:

“Financial advisors only care about selling products.” 

Reality: It is true that advisors may earn commissions from product sales. Some operate on a fee-based model. Their primary focus is to understand your financial goals, create a personalized plan, and guide you through the steps to achieve them. A good advisor puts your interests first.
If the advisor is not charging a fee be aware that selling a product may be their focus which may not serve you best. 

Myth 3: 

“I can manage my finances better on my own.” 

Reality: While it’s possible to handle your finances independently, a financial advisor brings expertise and a broader perspective. They stay informed about market trends, tax laws, and financial strategies, providing you with valuable insights that can enhance your financial well-being.

Myth 4: 

“Financial advisors are only for retirement planning.” 

Reality: While retirement planning is a significant aspect of what we do, financial advisors offer a range of services. They can help with budgeting, Mortgage advice, investment strategies, life cover, and more. Their expertise extends beyond retirement, covering various aspects of your financial life.

Myth 5: 

“Financial advisors are expensive.” 

Reality: The cost of a financial advisor varies, and many offer services that align with different budgets. Consider the value they bring in terms of financial planning, investment management, and potentially saving you from costly mistakes. In the long run, the benefits often outweigh the fees.

Myth 6: 

“I don’t need a financial advisor because I have a financial plan.” 

Reality: While having a financial plan is a great start, it’s essential to regularly review and adjust it based on changes in your life, the economy, and the market. A financial advisor can provide ongoing support, helping you adapt your plan to meet evolving circumstances.

Myth 7: 

“Financial advisors only focus on investments.” 

Reality: Investments are just one piece of the financial puzzle. Financial advisors take a holistic approach, considering your entire financial picture. They address debt management, tax strategies, insurance needs, and other crucial aspects to ensure a comprehensive and well-rounded plan.


Dispelling these myths highlights the valuable role that financial advisors play in helping individuals achieve their financial goals. Whether you’re just starting your financial journey or seeking to optimize your existing financials a qualified financial advisor can be a valuable ally on your path to financial success. 

Don’t let misconceptions hold you back from securing a brighter financial future!

Frequently Asked Questions About Financial Advice

Why should I seek financial advice? 

Financial advice can help you make informed decisions about your money, plan for the future, and navigate various financial challenges. Whether you’re saving for a major life event, investing for the long term, or managing debt, a financial advisor can provide personalized guidance based on your unique financial situation and goals.

How do I choose the right financial advisor for me? 

Start by assessing your needs and goals. Look for a qualified and experienced advisor, considering factors such as their qualifications, fee structure, and communication style. Seek recommendations from friends, family, or colleagues, and don’t hesitate to interview multiple advisors to find the best fit for your financial journey.

Are financial advisors only for wealthy individuals? 

No, financial advisors cater to a broad range of clients, not just the wealthy. Advisors can assist individuals at various income levels, helping them manage budgets, plan for major expenses, and optimize their financials to achieve their goals.

What services do financial advisors offer? 

Financial advisors offer a diverse range of services, including financial planning, investment management, retirement planning, tax strategies, estate planning, and more. Some may offer Mortgage Advice as well

The specific services can vary based on the advisor’s expertise and your individual needs.

How much does financial advice cost? 

The cost of financial advice varies. Some advisors charge a fee based on assets under management, while others may charge an hourly fee or a flat fee for specific services. It’s crucial to discuss fees upfront and understand how your advisor is compensated to ensure transparency. If an advisor is not charging a fee, be aware the focus may be on selling you a product rather than offering the best advice. 

Can I manage my finances without a financial advisor? 

While it’s possible to manage your finances independently, a financial advisor brings expertise, market knowledge, and a holistic approach to your financial well-being. They can provide valuable insights, help you navigate complex financial decisions, and optimize your strategy for better outcomes.

How often should I meet with my financial advisor? 

The frequency of meetings with your financial advisor depends on your needs and the complexity of your financial situation. Regular check-ins, especially during significant life changes or economic shifts, can help ensure your financial plan stays aligned with your goals. Advice First would recommend an annual review meeting.

What should I bring to my first meeting with a financial advisor? 

Prepare by bringing information about your current financial situation, including income, expenses, assets, debts, and any specific financial goals or concerns. This will help the advisor better understand your needs and create a tailored plan for you.

Can a financial advisor help with debt management? 

Yes, some financial advisors can assist with debt management by creating a plan to pay down debt efficiently, exploring debt consolidation options, and providing strategies to avoid future debt. They can also help you prioritize debt repayment within the context of your overall financial goals.

How can a financial advisor help with retirement planning? 

Financial advisors play a crucial role in retirement planning by assessing your current financial situation, determining retirement income needs, creating an investment strategy, and helping you navigate retirement account options. They can also assist with tax-efficient withdrawal strategies and estate planning for retirement assets.


For any person managing their own business, either solely or with business partners, there are important questions that need to be considered as part of normal business planning.

  1. When do I plan to retire? 
  2. What will happen to the business when I retire? 
  3. Where will my retirement income come from? 
  4. Will I be able to pass the business on to my children intact without being ravaged by tax? 
  5. How will my family survive financially in the event of my sudden death? 
  6. How would the business survive in the event of my sudden death or the death of a partner? 
  7. What would happen to my income in the event of a long-term absence from work due to illness?

What would you like to happen?
What plans have you made to ensure your hopes are likely to be realised?

Just as your business differs from others, so too will your business insurance requirements.
Your Advice First Advisor will be happy to look at your current situation, identify your needs and recommend the arrangement that is best for you and your business. 

Warning: The value of your investment may go down as well as up

Please note: Tax Relief on Pension Contributions

If your personal contributions are deducted from your bank account, you can apply to your ROS to have your tax credits adjusted to reflect your pension contributions.

If your contributions are deducted from your salary, you will receive immediate income tax relief.

Employer PRSA contributions and regular company pension contributions can normally be set against the employer’s liability to pay corporation tax in the tax year in which the contribution was made.

The information and figures stated are correct as of January 2023 but may change. 

What some of our happy Business Assurance customers have to say…


I have met with Pascal for a few different things over the years and will be dealing with him in future, it pays to have him on your side.

Would highly recommend Pascal, he is fantastic at what he does, we have been clients for quite a while now and anytime we need assistance it’s no bother to him. Always giving the best advice based on your circumstances. Also he explains everything in a way which is easy to understand, there’s no jargon or gibberish.

Stephen Dobbyn

Can’t recommend Pascal enough, he is very professional and very good at explaining everything in simple english, also making sure that you understand which is the important bit.
He has great patience for listening to the ‘silly questions’ and answering the questions you don’t think on asking.

Paul Mc Elhinney

Frequently Asked Questions on Key Person Insurance

What can the proceeds of a key person plan be used for?


The company can use these funds in any way it chooses: 

  • Repayment of bank loans, particularly any to which the key individual has given a personal guarantee.  
  • Repayment of any loans the key person may have made to the company. 
  • Recruitment of a successor.
  • Investment in the business.

How much cover is needed for a key person?


The cover required is the estimated financial loss that the business would suffer plus the costs of replacing the key individual. The level of cover is normally related to either the person’s salary or to the company’s profitability.

In assessing the amount of cover two important factors to consider are:

  1. Loan Repayment: any loans personally guaranteed by a key person, or any loans made by him or her to the company. 
  2. Loss of profits cover: the death or serious illness of a key individual could jeopardise the trading position and profitability of the company.

We would recommend, that the typical maximum cover levels should not exceed ten times salary, or if the calculation is in relation to profit then the key person’s percentage contribution to profit to a maximum of twice gross profit or 2.5 times net profit (i.e. profit after expenses but before tax).

Does the Company need to confirm at the outset what the Key Person’s cover is for?


It is recommended that a company taking out key person cover pass a board resolution recording their intention to affect key person insurance cover.
The resolution should cover the purpose for which the policy, or each policy, is being taken out. “That the company shall effect a life assurance policy on the life of Mr/Ms X in the sum of €XXX,XXX. 

The purpose of this insurance is to (meet the financial loss which the company is likely to suffer) / (protect company borrowing which may be repayable) in the event of his/her death whilst in the service of the company”.

This ensures: 

  • The correct tax treatment of the premiums 
  • That the key person knows that the cover is not his or her sum assured personally or for the benefit of his / her family


Are key person's insurance premiums tax deductible?


Generally speaking, key person cover premiums are not admissible deductions for corporation tax purposes.
However, the Revenue Commissioners have outlined the circumstances in which such premiums may qualify as admissible deductions: 

  1. the sole relationship is that of employer and employee, 
  2.  the employee has no substantial proprietary interest in the business, 
  3.  the insurance is intended to meet loss of profit resulting from the loss of the services of

the employee as distinct from loss of goodwill or other capital loss, and 

  1. the plan is a short-term insurance, providing only for a sum to be paid in the event of death.


Therefore, premiums on key person cover life assurance plans that do not meet all of the above requirements are not admissible deductions for corporation tax purposes. On this basis, key person covers life assurance premiums for plans taken out to repay loans or other outstanding debts are not admissible deductions for corporation tax purposes.

Are the benefits from a Key Person’s plan taxable?


This depends on the purpose of the key person insurance.



Tax treatment

To protect a company loan

Capital receipt, exempt from capital gains tax.
No tax liability arises for the company

To replace “loss of profit” or other “revenue items” (if the profits were earned, they would be subject to corporation tax) such as replacement costs

Likely to be treated as a “revenue receipt” and subject to corporation tax.

What if there is excess money from the policy?


Where a key person arrangement is put in place and the sum assured paid from the policy is in excess of the profits to be replaced or the loan to be paid off, the original need for the policy, then any excess will be taxed depending on what that excess is used for.

If it is used it to pay off a company loan, then the proceeds are likely to be treated as a capital receipt for the company. So, no liability to corporation tax arises for the company on that excess. If the money is used to replace lost profits or other “revenue items”, for example: if the shareholder also worked in the business the money might be used to replace him or her, the excess is likely to be treated as a “revenue receipt” and subject to corporation tax.


What are the under-writing considerations?

The most important information the underwriting needs to know, is what the reason for the key person cover is?

Is it to cover:

  • Business loan?
  • Expected loss of profits?
  • Replacement and recruitment costs?
  • Investment made into the business?
  • Venture capital investment?
  • Trading figures for the business for the past three years
  •  Details of and reasons for other cover in the market on the key person.

Are there any guidelines for appropriate levels of key person cover?


Depending on what the cover is for, you could use the following. 

  • Loss of Profits: average of the last two years’ gross profit (attributable to the key person).
  • Replacement Costs: 2 – 5 x income; however up to 10 x income is generally acceptable.
  • Business Loan: consider up to the full amount of the new business loan.
  • Investor Protection: the amount of cover should not automatically match the level of investment, in an investor protection scenario.

The sum of cover for all key persons should not exceed these multiples.

What if the key person cover involves a start-up company?

For a start-up company you may not the figures yet but to support the proposed cover we could us the following.

  • Background information (CV perhaps) on the person’s key skills would be very helpful
  • Clear explanation as to how the sum assured has been calculated
  • If there has been investment into the company, a copy of the investor agreement would be very helpful
  • Summary of the business plan if available.

Frequently Asked Questions on Shareholder Protection

What is shareholder protection?

Shareholder protection is life assurance that is taken out to protect both business owners and their families in the event of the death of one of the business owners.

Life cover is effected on the shareholders. The proceeds of this life cover are intended to enable the surviving owners to buy back the share of a business that belonged to the deceased shareholder.
This enables the surviving shareholders to retain control of the business. An agreement is put in place to ensure that this is what happens.

Why is there a need for shareholder protection for a company?


The sudden death of a shareholder in a private limited company can cause problems for both the surviving shareholders and the deceased’s next of kin. For the surviving shareholders the problems that can arise are:

  • Loss of control

If the deceased owned more than 50% of the company the other shareholders would now find themselves having to work with a new controlling shareholder, possibly the deceased’s spouse or one of their children.
There could be disagreements about how the business should be run, particularly if the new shareholder has no experience of the business.

  • Refusal to sell.

The ideal outcome for the surviving shareholders may be to buy back the deceased’s shareholding from his or her next of kin. But what happens if they refuse to sell?

  • Lack of liquid capital

Even if the deceased’s next of kin are willing to sell the surviving shareholders simply may not have sufficient liquid capital to buy the shares from them.

The surviving shareholders could borrow the necessary funds, but they would then be faced with the burden of loan repayments for years to come.

  • Shares pass to outside party

If the deceased’s next of kin want to sell and the other shareholders are financially unable to buy then the deceased’s next of kin may have to sell the shares to an outside third party, possibly a competitor or someone totally inexperienced in the business.



Life assurance protection can provide a solution to the problems outlined above by providing liquid capital on the death of a shareholder to enable:

  • the deceased’s shares to be bought back from his estate or next of kin, and
  • the surviving shareholders to maintain ownership and control of the business going forward.


Why is there a need for shareholder protection for a shareholder?


For the deceased shareholder’s next of kin, the problems that can arise are:

  • An illiquid asset

If the shares are not sold the next of kin may be left holding a ‘paper asset’ producing little or no income. The position could be even more serious if the shares also give rise to an immediate inheritance tax liability for the dependants.

  • No ready market for shares

The company’s Constitution may give the other shareholders the right to block the sale of the shares to any outside party. The next of kin could therefore be forced into a ‘fire sale’ of the shares to the other shareholders at a low price in the absence of any other realistic offer for the shares.



Life assurance protection can provide a solution to the problems outlined above by providing liquid capital on the death of a shareholder to enable:

  • the deceased’s shares to be bought back from his estate or next of kin, and
  • the surviving shareholders to maintain ownership and control of the business going forward.


How is shareholder protection set up?


There are two ways to set up shareholder protection. The cover can be paid for personally by the shareholders: personal shareholder protection: or it can be paid for by the company: corporate

shareholder protection.

The benefits of both the personal and corporate shareholder arrangements are the same:

  • On a death the surviving shareholders retain control of the company
  • The dependants of a deceased shareholder can realise their shares for cash shortly after death.


Each company’s individual circumstances will determine which option, either personal or corporate shareholder protection, meets their needs, but whichever route you chose, all it’s really about is putting life cover in place to ensure that the necessary funds will end up in the right hands at the right time, in both a cost efficient and a tax efficient manner.


What if there is excess money from the policy over the value of the Deceased’s shareholding?

Where the sum assured from the life assurance policy is greater than the value of the deceased’s share in the business any excess over the amount paid to the next of kin goes back into the company. How this excess is taxed will depend on what the company uses it for.

If they use it to pay off a company loan, then the proceeds are likely to be treated as a capital receipt for the company. So, no liability to corporation tax arises for the company.

If the money is used to replace lost profits or other “revenue items”, for example if the shareholder also worked in the business the money might be used to replace him or her, the excess is likely to be treated as a “revenue receipt” and subject to corporation tax.

Frequently Asked Questions on Partnership Insurance

Why is there a need for partnership insurance?

A number of problems can arise for a partnership upon the death of one of the partners.

For the surviving partners the problems that can arise are:

The partners may be legally bound, either under their own partnership agreement or under the Partnership Act 1890, to pay an immediate capital sum to the deceased partner’s estate in respect of:


  • The deceased partner’s share of undrawn profits for the year in which he/she died.
  • The deceased partner’s share of any partnership fixed assets, such as the office building.
  • The balance of his/her capital or loan account.
  • A payment in respect of the deceased partner’s share of partnership goodwill.


The partners could, therefore, be faced with the prospect of finding an immediate capital sum to meet their obligations to the deceased partner’s next of kin.

If they do not have sufficient liquid capital available, the surviving partners might have to borrow the necessary funds, but they would then be faced with the prospect of loan repayments for years to come.

If borrowing is not a realistic option at the time the partners might be forced to pay a pension to the deceased partner’s dependants. This would also be a long-term financial drain on the partnership.

  • For the next of kin the problems are:

The surviving partners may not be able to find the necessary capital immediately. In addition, some partnership agreements allow surviving partners to spread payments to a deceased partner’s estate over a number of years, up to ten years in some cases, which may not be suitable to their needs.
The problem is compounded by the fact that the next of kin cannot sell their partnership share to any other third party. They must therefore wait for payment from the surviving partners.


How is the partnership insurance set up?


Partnership insurance is arranged in two steps:

  1. Partnership legal agreement
  2. Life assurance

What are the benefits of partnership insurance?

  • Survivors have funds to buy the deceased’s share in the firm without having to resort to borrowing or selling assets.
  • Survivors retain control of the business.
  • The dependants of a deceased partner are financially compensated.

What are the taxation implications of a partnership insurance Arrangement?

There are 2 ways to set you this type of arrangement.


Taxation of plan proceeds – life of another

Capital Gains Tax

The proceeds of the partnership life assurance arrangement payable on death are not liable to capital gains tax under current legislation.

Inheritance Tax

On death the proceeds of the plan are paid to the plan owner where the arrangement has been made on a ‘life of another’ basis.

Where the plan is arranged on a ‘life of another’ basis under current legislation there will be no inheritance tax liability for the surviving partner provided he/she has paid the premium for the benefit he/she will receive.

Taxation of plan proceeds – own life in trust

Capital Gains Tax

The proceeds of the partnership protection arrangement payable on death or disablement are not liable to capital gains tax under current legislation.

Inheritance Tax

On death the proceeds of the plan are paid to the trustee(s) of the plan for the benefit of the surviving partners.

The Revenue Commissioners have clarified that the proceeds of such a plan are exempt from inheritance tax in the hands of surviving partners in certain circumstances, to the extent that they use the proceeds to purchase the deceased’s share of the business.

What if there is excess money from the policy over the value of the deceased’s share of the business?

How the excess is treated depends on whether the arrangement is set up as an ‘own life in trust’ arrangement or a ‘life of another’ arrangement.

Where an ‘own life in trust’ arrangement is used, any surplus arising on the death of a partner will be liable to inheritance tax in the hands of the surviving partners who are beneficiaries of the life assurance policy.

Where a ‘life of another’ arrangement is used, because the plan owner paid the premium for the ‘benefit’ he/she received, the proceeds are completely tax free in his/her hands.

Still Unsure about Business Insurance and Protection ?

Why not take advantage of our Protection Review, this review will give you a professional assessment on how well your existing arrangements meet your needs and may even save you money.

For updates and general advice, connect with us on LinkedIn here: Advice First Ltd.

Call us today in Letterkenny: 074 910 3938