John McColgan and Shona Chambers
One in ten people in Ireland are now cohabiting, meaning that they live together, have children together, or maybe even own their family home or other assets jointly, all without being married. Are you one of them?
by Shona Chambers
Refreshingly, the government has recognized that not all families fit the traditional mould, and has passed legislation giving some rights and protections to cohabiting couples. But in many cases, the legislation does not go very far. It is important for cohabiting couples to realise that situations may arise in which they would be treated very differently to married spouses.
First, they should consider guardianship rights of children. In Ireland, only mothers and married fathers have automatic guardianship rights, which means that in the event of his partner’s untimely death, an unmarried father may have seek guardianship rights through the courts.
Recent legislation does assign guardianship rights automatically to a father who cohabits with his child’s mother for at least 12 months after the date of January 18th, 2016. Three of those months must be after the child’s birth. However, if the mother is willing, she can voluntarily extend guardianship rights to the father if both parties sign a statutory declaration before a Commissioner for Oaths. The relevant form can be found on the website of Treoir, an information service for unmarried parents.
Everyone should make a will, but unmarried couples have an even more pressing need to do so. When you marry, your spouse automatically becomes your next of kin, but no such right is granted to cohabiting partners. If you die without a will, your partner may have no automatic right to inherit.
Additionally, inheritance taxes are handled very differently if couples are cohabiting rather than married. Only legal spouses and registered civil partners are exempt from inheritance tax. All other couples, regardless of how long they have lived together, are treated as strangers for inheritance tax purposes, meaning that their tax-free threshold is currently set at €15,075, with inheritances over that amount subject to Capital Gift Tax tax at a rate of 33%. With the possible exception of the family home, or a death benefit under an insurance plan, that €15,075 threshold could easily be exceeded quickly, leaving thousands owed in tax.
Is this something that you want to leave to chance?
I believe it is imperative that non-traditional families plan for the unexpected, even if they are young and healthy. Irish legislation provides extensive protection for married couples, but cohabiting couples should understand that they can be left vulnerable if they don’t make proper provisions.
Planning for inheritance tax bills can be taken care of easily by setting up a Section 70 policy (formerly Section 60) which aims to cover costs that may arise. A financial advisor like me can advise you on how to best plan for the future.
Shona Chambers BA QFA RPA is a Qualified Financial Advisor with John McColgan Financial Services Ltd.
You can contact Shona by telephone or email on 074 9124366/shona@mccolganfinancial.ie
