Can you clarify the inheritance tax for unmarried partners? I have lived with my partner for 25 years in a home that is owned by him. I don’t own another home. If he were to die, what is my tax liability?
Ms E.C.
One of the great reassurances for Irish families is the knowledge that when a spouse or partner dies, the one thing they do not have to worry about is tax.
The Capital Acquisitions Tax Consolidation Act 2003 ensures that anything passing from one spouse to another is free of tax.
Section 71 of the act, commonly referred to as Catca, is among the most straightforward and simple in Irish legislation. It states: “Notwithstanding any other provisions of this Act, an inheritance taken by a successor, who is at the date of the inheritance the spouse of the disponer [the person providing the asset], is exempt from tax and is not taken into account in computing tax.”
Crystal clear. Regardless of anything else in the legislation, which runs to a hefty 118 pages, transfers between spouses are ignored when it comes to assessing tax.
Section 70 of the same Act in practically identical wording says the same about any gifts that pass between spouses during their lifetimes.
And the same is expressly true for civil partners, though that is only relevant for same-sex couples who registered their partnership between 2011 and 2016 when legislation providing for same-sex marriage was introduced.
The issue is that a growing number of people in Ireland are not included in this blanket protection.
There is, in my view, a lot of guff spoken about the “right to inherit” in this State. Anyone who reads this page regularly will know my views on the sense of entitlement some people have about inheritance, especially when it might mean a parent spending their later years fearful of spending to ensure something is left to pass on.
Then there is a group that has been increasingly vocal recently in calling for the abolition of the tax altogether. Alan Shatter, who recently described inheritance tax as “not a tax on wealth but a resentment or jealousy tax, grounded in anachronistic socialist dogma, which attaches no value to responsible living, financial planning, hard work and generosity”, is to the fore in this camp.
Apart from some wild comments on double taxation, he carefully ignores the concentration of wealth already in Ireland and the fact that abolishing inheritance tax would only exacerbate this social divide. And while he correctly notes that less than 1 per cent of Ireland’s tax take comes from capital acquisitions tax, that is still €640 million that a Government would have to find elsewhere.
Finally, there are concerns among single people that their beneficiaries cannot benefit from the most generous category A inheritance and gift tax exemptions that apply from parent to child. Some of this group may not be able to have children; others choose not to. Either way, the category A threshold is designed specifically to provide some relief to immediate family on assets held in the family. If you don’t have children, it is not relevant to you – whether you are single or not. Single people are treated no different from anyone else under the tax.
Only one group has, in my view, real cause for complaint and that is precisely those who find themselves in your position – unmarried partners.
It seems absolutely incongruous in 2024 that two families are treated differently purely by virtue of one being married and the other not. Where the State and its tax policy chooses to support families, it should do so equally. And it doesn’t.
Take your case. This is not a fly-by-night arrangement. You have lived with your partner for 25 years and are clearly an established family unit – marriage or no marriage. But should he die, you will be treated as a stranger. If he does not make a will, you will be entitled to absolutely nothing under the laws of intestacy.
And even if he were to leave you everything he owns in a will, you would be treated as a stranger, entitled only to the lowest amount of tax relief – €16,250 at most. Everything he owns above that value that comes to you will be taxed at 33 per cent.
This is a classic example of how the law in Ireland incentivises marriage, rather than the family. It is an overhang of a time when almost all marriages in Ireland would have been religious, as well as civil, unions.
But as the figures available to us demonstrate, that is far from the case these days.
Data from Census 2022 shows that of the 1.28 million family units in Ireland, almost 177,000 are couples with or without children who are not married. That is almost 14 per cent of the total, or one in seven.
That is not to be confused with single-parent families, who account for another 220,000 families.
And the number is rising. The 2022 figure is more than 16 per cent up on the numbers from the previous Census just six years earlier.
Clearly all unmarried family units are not the same and there may be varying levels of commitment involved but personal experience says that most are no different from married people in their approach to family life. It is well past time that the Irish Government and its tax system took steps to treat all family units in an equal manner.
I think it is inevitable, given the electoral pressure of numbers, that it will happen in time. Will that come in time for you? I cannot say. These things generally take longer than might seem reasonable.
Meanwhile, you are left with the unpalatable option that I have seen so many couples take down the years – getting married for no other reason than to manage succession and inheritance.
However, before you get too down over your situation, there is some good news. Provided your partner’s home is left to you in his will, you can claim relief under the dwelling house exemption.
You are eligible as you will have been living there for at least the three years before he dies and own no other property. You should also have no difficult meeting the condition that you continue to live either there or in another property acquired with all the proceeds of the sale of this home for a minimum period of six years.
If you are over the age of 65 on the date you inherit the property, this six-year rule is waived. If not, and if you do not use all the proceeds of any sale of the current home to buy another property, Revenue could claw back capital acquisitions tax on the balance.
Of course, your partner could always put the property into your joint names at any point, ensuring that it passes to you regardless of the existence of any will or not.
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