A recent survey by Royal London insurance company found that almost four out of five people believe that tax treatment of cohabiting families is unfair, writes Grainne McGuinness.
Daragh Feely, broker sales manager, commented, “As cohabiting couples are, by far, the fastest- growing type of new family unit in Ireland perhaps it’s time that they’re considered within the current tax regime.”
Recently, Minister for Finance Michael Noonan said that the tax treatment of “different categories of couples, arise from the objective of respecting the Constitutional requirements to protect the institution of marriage”, and added that “any change in the tax treatment of cohabiting couples can only be addressed in the broader context of future social and legal policy development in”.
Given the minister’s stance, people cohabiting long-term should be aware of the differences in their treatment in comparison to married couples and work to avoid future problems.
I spoke to Brenda Forde, senior information officer with Treoir, the organisation for unmarried parents. They deal with cohabiting couples, and Forde said inheritance is a huge issue.
“Cohabitants are very poorly treated when it comes to inheritance. If the surviving cohabitant isn’t named in the will or there is no will, they have no right to inherit.
“Even if they are named in the will, there is no tax free inheritance threshold.”
There are some special protections in relation to the family home, but other than that, the survivor will have to pay inheritance tax on everything they inherit, which can cause severe financial pressure.
“Even if the constitutional protection given to marriage means cohabitants can’t be granted the same inheritance rights as spouses, surely some threshold could be put in place,” Forde suggested.
As it stands, a nephew or grandchild can inherit €30,150 tax free but a cohabitant has no such automatic right.
There were some protections for cohabitants added into law as a result of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010, although Forde feels it was a missed opportunity. “It did help but cohabitants were tagged on to the end, it was primarily to address issues of civil partnership and same sex relationships.”
The issues that were addressed were primarily about giving rights in the event of relationship breakdown. A person who has been in a cohabiting relationship for five years (two if there is a child involved) is described as a qualified cohabitant and may apply to a redress scheme. If they can prove financial dependence, they can look for a maintenance payment for themselves in addition to any children.
There is also the possibility that the court may make a property or pension adjustment order in their favour.
There will be times when couples may agree that they do not want to be bound by the new Act but rather decide their own agreement around property, assets, etc.
Legal recognition is given to Cohabitants’ Agreements which allows couples planning to live or living together to make arrangement regarding their joint financial affairs.
The parties must receive independent legal advice and it must be in writing and signed by both parties.
There are issues other than financial, in cases where cohabitants have children, the lack of automatic guardianship rights for the father has long been a bugbear.
That was addressed in the Children and Family Relationships Act 2015 which said a father who is living with the mother continuously for a year, three months of which are after the birth of the child, will automatically become a guardian.
If you would like to seek assistance in relation to parental rights or similar matters, call Treoir at 1890-252084, or get information from their website www.treoir.ie.
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