Tuesday, April 26, 2016

Hot Topic #9 : Protection for co-habiting couples

Protection for co-habiting couples

1 in 10 adults in Ireland are co-habiting.  Are you one of them?
Most people are aware that inheritances passing between married couples or registered civil partners are exempt from inheritance tax but this exemption only applies for “legal spouses” and “Registered Civil Partners”. 

All other co-habiting couples are treated as strangers for inheritance tax purposes.
• The 'stranger' tax-free threshold for Inheritance tax is €15,075.
• Inheritances (since 6 December 2012) that are in excess of €15,075 are subject to tax at a rate of 33%.
For example:
• John and Mary buy a home in joint names. They contribute equally to the deposit, the mortgage repayments and the joint mortgage protection policy. The home is valued at €300,000.
• John dies in the first year of their living together. The mortgage is cleared by the mortgage protection policy.
• Mary inherits 50% of the property, assuming it was owned as joint tenants.
• Mary's tax-free threshold is €15,075, with the balance of €134,925 taxable at 33% resulting in a tax bill of €44,525.

The belief was that the civil partnership legislation would fix inheritance tax and succession planning issues for unmarried couples, but it hasn’t.

Might you face an inheritance tax bill in the event of the death of your partner?

If you would like to talk about this or need any other financial advice, please call Michael on 086 844 0541 or email info@mkfinancial.ie  to arrange an appointment.

Michael Keville T/A MK Financial is regulated by the Central Bank of Ireland

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