Cohabiting partners do not automatically have rights to their partner’s estate, says Karen Walsh.
Are you unmarried and buying a house with your partner?
You’re not alone.
More and more couples are living together these days, either before or instead of getting married.
There are some issues that require consideration before you buy.
Joint tenants or tenants in common?
When buying a house together, couples should consider whether they would purchase as joint tenants or tenants-in-common.
Where a property is owned by two or more persons as joint tenants, then that means each of the co-owners have an equal right to possession of the entire property.
Accordingly, one person cannot sell, mortgage or otherwise deal with the property without the consent of the other co-owner.
Also, with this type of ownership, if one of the joint tenants dies, the property automatically becomes the property of the other joint tenant by survivorship.
If partners are contributing unequally to the purchase of the home, or to future mortgage payments, a tenants-in-common arrangement allows this to be specified.
Where property is owned in a tenancy-in-common situation, a co-owners share will pass under the terms of their will or under the rules of intestacy.
If one partner dies and leaves his or her interest in the property to their partner, the surviving joint owner is taxable on the value of the interest he or she receives.
Most people are aware that all benefits passing between married couples are exempt from inheritance tax.
This was extended to include civil partners in 2011.
There are households where the owners are neither married nor civil partners. Such couples are treated as “strangers in blood” for tax purposes.
The tax liability could be substantial, and it is prudent to consider taking out a policy of insurance on the other partner’s life, to cover all or part of this.
In the alternative, the house may have to be sold in order to raise the money to pay the tax bill.
Inheritances above €16,250 are subject to tax at 33%, so if you inherit a house worth €300,000, on the death of your partner, the inheritance tax bill could be €44,137.50.
Make a will
If you are living with your partner, it is essential you have a valid will in place, because partners do not automatically have rights to their partner’s estate, if they die without leaving a will.
If you are in a cohabiting relationship, and you die without a will, your partner has no right to any share of the estate, no matter how long you have been together, apart from what was held jointly.
Making a will can ensure proper arrangements are in place, and that your property is distributed as you wish after you die, subject to certain rights of spouses/civil partners and children. You should contact your solicitor.
If married or in a civil partnership, the Succession Act 1965 gives your surviving spouse/civil partner a legal right to a share of your estate when you die, no matter what you specified in your will.
This does not apply to cohabiting couples.
The Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 provides for the rights and duties of cohabiting couples, whether same sex or opposite sex.
Cohabitants are defined in Section 172(1) of the 2010 Act as “one of two adults (whether of the same or the 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”.
Section 172(5) of the 2010 Act confirms that a cohabiting couple must have lived together in an intimate and committed relationship for five years, or two years if the parties have children together, and the person applying to the court must be financially dependent on the other person.
Under the act, qualified cohabitants may apply to court for provision to be made from the estate of a deceased cohabitant.
Cohabiting couples do not have automatic rights; the court will decide each case based on its own circumstances and merits.
Cohabiting couples planning to buy a home must think carefully about the legal and tax implications of such a decision.
Each couple’s situation is unique, and seeking professional advice from a solicitor is one of the best ways to ensure that your estate planning is handled properly.