Smart living for co-habiting couples

 

Couples that live together and are not married or in a registered civil partnership, are often referred to as co-habiting couples. If they own property, this can lead to an inheritance tax liability as generally only married couples and registered civil partners are exempt from inheritance tax.

When it comes to inheritance tax, co-habiting couples pay tax of 33% on an inheritance above the current Group C, “strangers”, threshold of €16,250, unless the Dwelling House Exemption applies.

However, it is possible to structure your mortgage protection in a way that would help fund, and in some circumstances even reduce your inheritance tax liability. How this is done will depend on:

1.      whether you are setting up mortgage protection cover for the first time or

2.      whether mortgage protection is already in place.

You should also consider;

• If premiums are paid from a Joint Account, both partners should be seen to be contributing to the account.
• If one party does not have the funds to pay the cost of the premium, they could avail of the small gift exemption which is €3,000 per annum (Revenue, 2021).
• If the partners have other assets which they would inherit from one another, then a Section 72 Life Assurance policy could be more beneficial.
•  If there are children who are financially dependent on your income it is important to note that the Widows/Widowers Pension is only paid to those that were married or in a civil registered partnership. This needs to be taken into account when reviewing the appropriate level of family cover required.

 Live Smart - Speak to your Financial Adviser today to discuss the best options for you.

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