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Unmarried Couples - Their Property Rights

The issue of property ownership of a spouse after the death of their partner has been relatively straight forward since the implementation of the Succession Act 1965. Should a spouse die intestate (not having made a will) with no children, the surviving spouse is entitled to the entire deceased spouse's estate. If the deceased has surviving children, the surviving spouse is entitled to two thirds of the estate, the remaining third going equally to the deceased's children. There is also a further protection for the surviving spouse where the deceased spouse has made a will. Irrespective of the deceased spouse's wishes under his or her will, the surviving spouse is entitled to elect to take half the value of the estate in place of his or her entitlements under the will. However, the surviving spouse would only be entitled to one third if the deceased had children. Furthermore, the surviving spouse may appropriate the family home, in satisfaction of his or her legal right share.

The legal right share of a spouse may be renounced in an ante-nuptial or post marriage contract during the lifetime of the deceased spouse.

There are certain exceptions to a spouse's legal right share, set out under Section 120 of the Succession Act. The most relevant of these, would be a spouse guilty of desertion for two years or more immediately prior to the deceased's death. In this situation the spouse would be precluded from any share in the estate of the deceased on intestacy or as a legal right. In addition, a spouse who was guilty of conduct which justified the deceased in separating and living apart from him or her shall be deemed to be guilty of desertion.

Position for Unmarried Couples

The situation is nowhere near as clear in relation to property owned by couples in a long term relationship who are unmarried. Irish law, for the main part, does not recognise the concept of common-law relationships. Under the provisions of the Succession Act and for the purposes of capital taxes, an unmarried couple in a long term relationship are considered strangers. There is no automatic transfer of property to the surviving partner. This applies even if the property had been transferred into joint names.

"Resulting Trusts"

The concept of trusts arises in the situation where one person provides the consideration or purchase monies for property but buys it in joint names. The law presumes that the person who did not provide the money, holds the property in trust for the person who did. Therefore, in the event of the death of the contributor, the property is presumed to fall into the estate of the contributor and does not automatically go to the surviving joint owner. It is up to the surviving joint owner to disprove this presumption. This type of trust is described as a "presumed resulting trust".

The situation is again different for a married couple. If one wife, for example, provides the consideration for the purchase of property and registers it in joint names with her husband, or alternatively, transfers her own property into joint names with her husband, the law presumes that she intended to make a gift of the property to her husband.

Many couples in modern Ireland choose not to marry, but consider themselves in a life long, committed relationship. The doctrine of presumed resulting trust is of huge significance to these people. Taking the precaution of putting all the property into joint names is not sufficient to guarantee the surviving partner will be entitled to the property.

In an unmarried relationship, where a partner dies leaving property in joint names, and there is a dispute in relation to the ownership of the property, the Courts will look at the contribution made by the surviving partner in determining whether or not they are entitled to the property. The obvious danger arises where one partner works outside the home and makes the mortgage payments on the house, while the other gives up his or her job to maintain the home and look after the children. Even if the house is in joint names, on the death of the contributor, the property will fall into the deceased's estate and be distributed to the next-of-kin, which may not include the surviving partner. The possibility exists, that a parent and children are left homeless. There is, however, protection for children under the Status of Children's Act and Succession Act.

Make a Will

The obvious solution to this problem for couples in this situation, is to make wills providing for their partners. However, many couples in stable relationships, for one reason or another, fail to take this crucial safeguard.

Another important consideration is that of ascertaining who has the say in the arranging of the funeral. Unfortunately, this is a problem which is not considered often enough during the lifetime of people in a subsequent or unmarried relationship. It is, obviously, a distressing time for everybody and the situation can only be worsened by squabbles over the funeral arrangements. It can lead to undignified conflicts. Again, the way to avoid this situation is to make a will setting out your clear instructions in relation to your own funeral arrangements. You can specify who is to take care of the arrangements and you can indicate the type of funeral you wish to have. It is important to inform someone of the existence of the will and that it contains expressed wishes in relation to your funeral, as more often than not, the will is not dealt with until after the funeral. Often people have made wills during a previous relationship and it is important to update a will when circumstances change. It is a very inexpensive process and it gives great peace of mind.

The Problem with Tax

Given that there are ways of passing your property on to your surviving partner, there is one further difficulty to be faced, namely tax.

Gift tax is payable on transfers of property where no consideration is involved. Property transferred from one spouse to another is exempt from Gift Tax. There are high tax free thresholds for property being transferred between relatives. For example, the tax free threshold for a transfer from parent to child is presently £316,800. However, a couple in a relationship who are not married to each other, are considered strangers from the point of view of tax legislation. The threshold in this situation is only £15,840. This in effect means that the value of the property, over £15,840, transferred between one unmarried partner and another, is liable to Gift Tax. The tax free thresholds are exactly the same for Inheritance Tax purposes. Therefore, if you inherit property from your unmarried partner you will be liable for tax on the property value over £15,840 at a rate of 20%.

Here is a simple example. John and Mary have been living together for seven years. They are not married. They have three children. John bought the house prior to meeting Mary and after a number of years together, he decided to put the property in joint names. John worked as a carpenter and Mary looked after the children at home. John paid the mortgage and other household expenses. John died tragically in a car accident. Immediately, Mary has a number of legal and taxation problems. Firstly, she has to overcome the difficulty of setting aside the presumption of resulting trust. If we accept that she could set aside the presumption (which is not guaranteed), the entire property would go to her. If we take the property to be valued at £120,000, the Revenue would deem her to have received a benefit or inheritance worth £60,000 at the time of John's death, and they may also seek a tax payment for the initial gift when the property was placed in joint names. If we take the inheritance tax position alone, Mary would be entitled to a tax allowance or threshold of £15,840. She would have to pay tax on the balance, ie: 20% of £44,160, giving her a tax bill of £8,832.00. This does not take into account the tax bill for the previous gift. One would have to question the justification of Mary being left with a £9,000 tax bill in these difficult circumstances.

The tax rate is relatively low at the moment, in comparison to rates in the past, but this could change in future budgets.

A similar lack of allowances exist in the case of stamp duty. A transfer between spouses is exempt from stamp duty and for transfers between relatives half the normal rate is payable. The full rate is payable for transfers from one unmarried partner to the other.

It is clear that there are a number of extremely onerous taxes facing unmarried couples. To avoid the obvious hardship situations, perhaps legislation could be introduced to protect couples in this situation, particularly when children are involved.

The present law penalises unmarried couples in Ireland and does not take into account the circumstances of many couples, who, to all intents and purposes, are involved in married relationship. The major concerns relate to taxation and the rights of the former spouse and legal next-of-kin. Steps can be taken to attempt to make life easier for the partners in an unmarried relationship. The most important step is to make a will.

Each situation needs to be looked at individually and the foregoing is intended to provide a general overview of the present position. When taking action to protect your rights, it is essential that professional advice should be sought.

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