For the past 25 years Ms H (59) has been cohabiting with her partner, who is 72. He has recently written a will in which he has left her the right of residence of their apartment, of which he is the registered owner and which is worth £120,000. "Can I be evicted by his family if he should pre-decease me? Will I have to pay tax?" she asks.
People who co-habit outside of marriage have no legal status and are subject to the full rigours of the tax law as it applies to single persons. None of the married person's income tax reliefs is available to them they cannot share tax allowances which allow the person with the higher income to offset more tax and they are subject to inheritance taxes at the rates that apply between strangers. Married couples do not pay any inheritance tax on assets left to each other. In Ms H's case, the right of residence that her partner has left to her in his will means she can live in his (i.e. their) apartment until she dies, after which it will be disposed of by further reference to his will or under the laws of intestacy, whichever shall apply. - presumably - his next-of-kin.
Ms Darina White, of the Private Client Department of A & L Goodbody, recently wrote an article about co-habiting couples in the company's newsletter. "You can will a right of residence to someone, but it is a very complicated area, both from the legal and tax point of view," says Ms White. "A lot of questions need answering before you could say for sure whether the will is watertight. Has either party been married before, are they legally separated or simply living apart from a spouse? Have all the rights under the Succession Act been properly considered? What this lady needs is specialist legal advice to investigate whether she will have the right to live in the apartment."
The tax situation is not clear either, says Sebastian Taylor of the Taxation Advice Bureau. "In a typical case of right of residence it usually involves a family situation, where there is a father, mother and child," explains Mr Devlin. "The father, in whose name is the family home, leaves the mother the right of residence of the property until her death, after which it passes to the child. Inheritance tax is still payable on the property on the death of the father since the son or daughter is the ultimate inheritor. But because the child doesn't have access to the property perhaps for several years the tax is discounted. The Revenue has a very detailed formula for working this out and it can be very complicated."
The problem for our reader is that unless both the legal and tax situations are watertight, she may face some difficulties upon the death of her partner, if his relatives object to having to pay tax on a property to which they have no access and, therefore, contest the will.
Ms H, say our experts, should take independent legal advice about her situation.
