Inheritance Tax for non married couple

Civil Partners and cohabitants – is there inheritance tax on death?

Our society  is changing and more people are choosing to live together in non-married relationships. Statistics tell us that 1 in 10 adults in Ireland are co-habiting. With the implementation of the Civil Partnership and Certain Rights & Obligations of Cohabitants Act 2010, rights similar to those of married couples have been conferred on registered civil partners and qualified cohabitants.

What is a Civil Partner?

 A civil partner is either of two persons of the same sex who are;

  1. Parties to a civil partnership registration that has not been dissolved or the subject of a decree of nullity.
  2. Parties to a legal relationship of a class that is the subject of an order made under section 5 (Recognition of registered foreign relationships) that has not been dissolved or the subject of a decree of nullity.

What is the legal definition of a Cohabitant:

A cohabitant is one of two adults, who can either be of the same or opposite sex, who live together as a couple in an intimate and committed relationship and who are not related to each other within the prohibited degrees of relationship, or married to each other, or civil partners of each other.

In deciding whether or not two adults are cohabitants the following will be taken into account;

  • The duration of the relationship,
  • The basis on which they live together,
  • If any financial dependence exists,
  • Any joint financial arrangements,
  • Whether or not there are dependent children, and the support arrangements for any children,
  • Whether the parties present themselves to others as a couple.

What are the Inheritance Tax consequences for Civil Partners and Co-Habitants?

Married couples or registered civil partners are exempt from inheritance tax.  This exemption only applies for legal spouse and registered civil partners.  The same rights on death have not been granted to cohabitants.

A qualified cohabitant now has the right to apply for provision out of their deceased co-habitant’s estate within six months of grant of representation.  However, it is not an automatic right as in the case of a civil or married partner.  While the surviving cohabitant partner has the legal recourse to claim from the estate of their deceased cohabitant partner, no change has been made to the Capital Acquisitions Tax.

All other co-habiting couples are treated as strangers for inheritance tax purposes. Thus the surviving cohabitant may still have to pay inheritance tax on the value of the assets. However cohabiting couples may  qualify for Family Home Relief

What is Family Home Relief?   

The Finance Act 2000 introduced a complete exemption from Inheritance Tax on the value of “a dwelling”, provided the person inheriting the property satisfied certain conditions – basically that it was, and continues to be, their home. This is commonly referred to as “family home” relief. The relief is available to any individual who satisfies the conditions and not just too qualified cohabitants.

To qualify for the exemption the person who inherits the home must:

  • Have occupied the house as his/her sole or main dwelling for three years prior to the date of the gift/inheritance .
  • At the date of the gift/inheritance not hold an interest in any other dwelling house
  • Continue to occupy the house as his/her sole main residence for 6 years after the date of the gift/inheritance.

It is important to understand the tax and inheritance consequences for individuals in a non-marital relationship as you may get a nasty shock.  Understanding the legal position means you can plan to ensure your loved ones are protected and provided for adequately.

This blog is a limited amount of information on a very broad subject.  For full details you could refer to information provided by the Citizens Advice Bureau.