Did you know however that only married couples or registered civil partners are exempt from inheritance tax under current tax laws?
Increasingly as a society couples live together and either postpone or choose not to marry. However, if you are in a cohabiting relationship and you die without making a will, your partner has no right to any share of your estate irrespective of how long you have been together (apart from what was held jointly such as joint bank accounts, joint property etc.). Your partner if you are living together is not your next of kin to whom it falls to extract a Grant of Administration if you die without a will. There is however an Inheritance Redress Scheme for cohabitating couples. A qualified cohabitant may apply for provision to be made from the estate of the deceased cohabitant. Any gift or inheritances taken by a qualifying cohabitant are exempt from Capital Acquisitions Tax if they are made pursuant to a court order made in accordance with an application under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010. This Act is quite a mouthful but is a milestone in Irish law in extending the categories of relationship to whom the law will afford protection. It is a complicated area of law however and does require specific and expert legal advice in the event that you are dealing with the death of a partner or loved one and in need of legal assistance.
(Our private law team at Carmody Moran Solicitors are experts in probate and family law and are expertly placed to assist and guide you through a probate in such an instance and whether or not your circumstances merit applying for recourse under the redress scheme.)
In brief, in reviewing such an application the court will consider certain factors including:
- The financial circumstances of the parties.
- The rights and entitlements of any spouse or former spouse, civil partner or former civil partner.
- The existence of any children.
- The duration of the parties’ relationship.
- The contributions made by each cohabitant including contributions made in looking after the home.
- The effect of the earning capacity of each cohabitant or the responsibilities assumed by them during the period they lived together.
- The conduct of the parties where it would be unjust to disregard it.
Inheritance Tax for ‘Strangers’
It is noteworthy that if you find yourself in a situation where your partner has died and you are uncertain as to next steps, if you do not qualify under the redress scheme, then you will be treated as strangers for CAT purposes from your partner in terms of your inheritance. The current CAT threshold for strangers is €16,250 (presuming you can access the full threshold and have not ‘spent’ it previously). Anything above that threshold will be taxed at 33%. This situation differs radically to the relief available to married couples where gifts or inheritances between you would be exempt from CAT. Also the surviving spouse possesses a unique importance because of the provisions of the Succession Act 1965 whereby a spouse can make claim to a legal right share. In a recent blog post we wrote about the certainties of death and taxes and wills and disputes. Death is the one milestone in life that we can all be assured of reaching. Glum reading I know! Putting together a plan however or even taking the simple step of writing a will can protect your family greatly in the future. In essence the moral of the story is that it is important that you draw up a will to ensure that your wishes are met on your death and furthermore to take advice to safeguard joint or intended joint assets on death if you are not married.
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Niamh Moran is a partner at Carmody Moran Solicitors in Dublin. Niamh’s litigation experience includes injury claims law (both Plaintiff and Defendant) and is an Advisory Board Member of the State Claims Agency.