Unmarried couples who have purchased a house together could face a huge tax bill if one of them passes away .jpg)
compared with a surviving spouse who would pay nothing.
According to a report in The Irish Examiner, four out of five first-time buyers over the last few years have been unmarried couples. However, there are no official statistics to back this up.
In an editorial, the paper argues that the tax code should be changed to so that unmarried couples have to pay no more tax on their houses than married couples, although arguably this would be unconstitutional as the Constitution protects the special status of marriage which would be reduced if its tax benefits were given to unmarried couples.
Dave Kavanagh, advisor with Alliance Insurance Brokers, told The Irish Examiner that with a house worth €400,000, one party could be liable for a tax bill of €45,849 unless certain mortgage and insurance policy arrangements have been put in place correctly.
If a co-habiting couple have a joint life insurance policy, in the event of death, one party may be deemed to have inherited some or all of the proceeds of the policy.
This would depend on how the premiums were paid and Revenue will look for evidence to determine who has been paying the premiums.
“If it is clear that the premiums were paid from a joint bank account and contributed to by both parties, then it is deemed that 50pc of the proceeds have been inherited.
“They are however defined as a stranger and their tax-free allowance is just €16,604, so they are liable to pay 25pc tax on the value of the share of the house above that amount.”
Head of sales and marketing with Caledonian Life, Greg Dyer said there is a solution to this tax conundrum, whereby each partner pays for the other’s life assurance policy on their mortgage.
“In this scenario, where one partner paid the premiums but the other partner died, there would be no tax liability as it would be deemed that the surviving partner paid for the benefits and therefore is entitled to the proceeds,” he said.