Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE -

Many co­hab­it­ing cou­ples could find them­selves in a very dif­fi­cult po­si­tion when it comes to in­her­i­tance tax. Should you and your part­ner have never mar­ried, you could face a sub­stan­tial in­her­i­tance tax bill when your part­ner passes away — even if you have lived to­gether for many years and have had chil­dren to­gether. You could even face a ma­jor in­her­i­tance tax bill when the fam­ily home passes to you, par­tic­u­larly if you and your part­ner did not buy that home jointly.

Mar­ried cou­ples and civil part­ners have a big tax ad­van­tage over un­mar­ried cou­ples: a spouse or civil part­ner does not have to pay in­her­i­tance tax on any­thing left by the de­ceased part­ner to him or her (though a di­vorced or sep­a­rated spouse may have to). The sur­viv­ing part­ner in a co­hab­it­ing cou­ple, how­ever, does not en­joy the same au­to­matic ex­emp­tion from in­her­i­tance tax as spouses and civil part­ners do.

“Part­ners in co­hab­it­ing cou­ples are ef­fec­tively strangers for the pur­pose of in­her­i­tance tax as they are not blood rel­a­tives and they are not mar­ried,” said Oon­agh Casey Gre­han, part­ner with Fagan & Part­ners. This means that, typ­i­cally, the most that a part­ner in a co­hab­it­ing re­la­tion­ship can in­herit from the other tax-free is €16,250, ac­cord­ing to Casey Gre­han.

So, if you have lived for many years in a prop­erty which was owned by your part­ner, and that prop­erty has be­come the fam­ily home, you could have to pay in­her­i­tance tax at a rate of 33pc on most of the value of that prop­erty (bar the first €16,250 of it) if it is left to you. So you could find your­self in a sit­u­a­tion where you have to sell the fam­ily home to set­tle the in­her­i­tance tax bill.

You may be able to in­herit the home tax-free if you qual­ify for a tax break known as the dwelling house ex­emp­tion. How­ever, there are strict con­di­tions around this tax break and just be­cause you have lived in the home for many years doesn’t mean you au­to­mat­i­cally qual­ify for it.

For ex­am­ple, should you own or have a share in an­other dwelling prop­erty, you won’t qual­ify for the dwelling house ex­emp­tion. This ap­plies whether the other prop­erty is lo­cated in Ire­land

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