Cohabiting can be costlier than you think

• Date: 10 December 2020
• Published date: 10 December 2020
• Author: Joanne Hunt
• Publication title: Irish Times (Dublin, Ireland)

"It's definitely a higher priority to get the house before the wedding," says financial planner Daniel Hardiman. "I generally see it for individuals in their early 30s who have found that rent is so expensive. Or you might see people in their 40s if there is a separation. I'd say 90 per cent of them are unaware of the tax implications of cohabiting." Indeed, where the couple breaks up or if one party dies, the financial fallout can be a disaster.

There were 152,302 cohabiting couples recorded in the 2016 census. That's a fivefold increase on 1996. About half of them have children. At the same time, the number of couples with children opting to get married increased by just 15.6 per cent. So, for many, cohabiting is not a stepping stone. Despite this growing family type, the State continues to give "fiscal preference" to those who are married. Taking steps to protect yourself makes sense.

Hard conversations Moving in together is a heady time. Choosing furniture, mulling paint colours, your first joint Netflix account are all a thrill. Death and taxes won't be top of anyone's list over dinner à deux

, but hard conversations can save serious heartache.

When it comes to couples buying property, the bank doesn't care if you are married. You don't even need a joint account, says Michael Dowling of Dowling Financial. "Will their salary cover the mortgage and have they shown repayment capacity, that's what the bank wants to know," he says.

When buying a property, cohabitants can choose to do so as "joint tenants" or "tenants in common". The bank doesn't care much about that either, but cohabitants should. "You never want to think the relationship will break up or that one of you will pass away, but from day one you need to make provision for what will happen to your share in the property," says Dowling.

In a joint tenancy, the property automatically goes to the surviving tenant if one of you dies. "If it's a joint tenancy, no one else can interfere with that, it will automatically vest in the surviving joint tenant," says solicitor Susan Murphy of Makemywill.ie. So far, so romantic. The only problem is tax. Married couples and civil partners can inherit millions and mansions from each other and not pay a cent in tax. It's a different story for cohabitees.

"From a tax point of view, you are inheriting the value of a half-share in the property. The tax threshold for inheritance when you are not married is only €16,250. Anything above that amount is taxed at 33 per...