Will I get hit for tax for not getting wed?
Published 06/07/2014 | 02:30
My partner and I have been living together for the last ten years - in a house which my partner bought some time ago. We have no plans to get married or to register a civil partnership. Will I be hit with an inheritance tax bill should my partner pass away and leave the house to me?
Christina, Clontarf, Dublin 3
Roisin replies: You shouldn't have to pay any inheritance tax if your partner's property is passed onto you - as long as the property is a family home.
There is a tax allowance known as family home relief which aims to reduce the inheritance tax bill for those living together who are not married. This relief is very beneficial to unmarried partners who would otherwise face a tax bill on such an inheritance.
There are a number of conditions which must be met for you to qualify for the relief. You must have lived in the house for three years before the inheritance and the property must also have been your sole or main dwelling residence. At the date of the inheritance, you must not hold an interest in any other dwelling house. You must also continue to occupy the house as your sole or main residence for six years after the date of the inheritance.
Q My husband and I have a large extended family with plenty of grandchildren, nieces and nephews - as well as our own children. We are deciding how to pass on our wealth to our family - so that they pay the least amount of inheritance tax. We understand that it is possible to inherit a certain amount of money from us tax-free - how does that work?
Emma, Castlebar, Co Mayo
A When you leave an inheritance to someone in your will, the amount of inheritance tax they pay (if any) will depend on whether they are related to you or not - and exactly how they are related to you.
Should you be passing on an inheritance to one of your children, your child can inherit up to €225,000 from you tax-free. This is not per gift or inheritance received - but a total lifetime sum.
Should you be passing on something to your nephew, niece, grandchild, brother or sister, the tax-free threshold is €30,150. So a child can receive an inheritance of up to €30,150 tax-free from an aunt, uncle or grandparent. Again, this is a total lifetime sum.
Should you be leaving an inheritance to someone who is not related to you - or a partner that you have not married or entered into a civil partnership with, the tax-free threshold is only €15,075. So the individual in question can only inherit up to €15,075 from you tax-free over your lifetime.
The rate of inheritance tax - also known as capital acquisitions tax - is 33 pc. So that rate of tax must be paid on the value of any inheritance which is liable for tax.
Remember, an annual small gift exemption applies to the first €3,000 received from any person. Therefore, when alive, you and your husband can each gift each of your children, grandchildren and indeed in laws or partners of your children €3,000 a year.
For example if your daughter is married and has three children, you and your husband could give her €6000, each of the children €6000, and her husband €6000 every year with no tax consequences.
So in ten years, your daughter and her family could have received €300,000 tax-free from you and your husband.
Roisin Duffy is tax director with UHY Farrelly Dawe White in Co Louth
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