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Know the rules on cohabitation

Many parents are considering transferring the family farm to their farming sons or daughters before next December's Budget in order to avoid the possibility of reduced tax breaks on farm transfers. But the implications of the new laws regarding cohabitation are also making some parents nervous about their plans.

Cohabitation covers a vast array of different arrangements, from couples living together either prior to or as an alternative to marriage or couples where one or both may be separated or divorced and either unable or unwilling to enter into marriage.

But at what point do adults living under the same roof move from having a casual relationship in the eyes of the law to the point where they are officially cohabiting?

First of all, it must be an intimate or committed relationship of cohabitation between two adults for a period of at least five years. This reduces to just two years where they are parents of a dependent child.

The Civil Partnership Act enables an economically dependent party at the end of the relationship between a cohabiting couple to apply to court for maintenance; property or pension adjustment orders; and provision from the estate of a deceased cohabitant. However, cohabitants can opt out of the redress scheme by agreement of both parties.

While the Act only came into force at the beginning of this year, the time during which a couple cohabited before January 1 may be included for the purposes of calculating whether the two-year or five-year period of living together as a couple have been satisfied.

However, the Act only applies to relationships that have ended, whether by death or otherwise, after January 1. I have heard of a case recently where a woman, whose cohabitation relationship was over before January 1, was advised by her solicitor to stay within the relationship until the terms of the Act started, something which I would not personally condone myself regardless of the perception of injustice done.

There is a time limit for applicants to adhere to, which obliges cohabitants to apply for financial orders within two years of the end of the relationship. The two-year rule applies except in limited exceptions.

Past Relationships

As with any law, there are exceptions. These include situations where:

•One or both of the adults is, or was, at any time during the relationship concerned, an adult who was married to someone else, and;

•At the time the relationship concerned ends, each adult who is, or was, married has not lived apart from his or her spouse for a period of at least four years during the previous five years.

This provision has generated considerable debate. Take for instance a case where a single woman forms a relationship with who she thought was a separated man and, after some months of courtship, she leaves her full-time job to move down the country to move in with him. They have a child together and as well as being a homemaker she is responsible for milking cows and rearing the calves while he is busy as an agricultural contractor. On the relationship's fourth anniversary, the married man invites his wife back to live with him. In such an instance, the woman has no comeback under the Act despite having had a child together.

If she wished to claim any share in the property, she would have to show an actual financial contribution to the acquisition or improvement of that property.

Court Orders

A qualified cohabitant may apply to court for a range of orders, including maintenance, property or pension adjustment orders and provision from the estate of a deceased cohabitant.

If the court is satisfied that the applicant is financially dependent on the other cohabitant, it can order the other party in the relationship to provide maintenance, property, pension entitlements or a provision from the estate in the case of a deceased cohabitant.

Factors considered by the court include:

•The financial circumstance needs and obligations of each cohabitant;

•The rights of others. An order may not affect the rights of a spouse or former spouse;

•The duration and nature of the relationship;

•The contribution made by each.

The court can vary, suspend or discharge an order if circumstances change.

A way of side-stepping the possibility of this scenario ever arising is by drawing up a Cohabitants' Agreement. In this way, a farmer's son or daughter and their cohabiting partner can outline what financial provisions will apply during and after the relationship. The agreement can also provide that the redress scheme does not apply in the event of the end of their relationship. It is similar to a pre-nuptial agreement but, crucially, it has legal recognition.

In circumstances where parents are transferring the family farm to their farming son/daughter, perhaps it is prudent for a Cohabitants' Agreement to be drawn up in conjunction with the Deed of Transfer. Otherwise, alternative structures which take the asset out of the direct ownership of the farming son or daughter, while still giving them a share in the farming enterprise, could be explored, such as the formation of a partnership or farming company.

If the issue is ignored, the danger arises that the future of the family farm could be decided in a court room.

Disclaimer: While every care is taken to ensure accuracy of information contained in this article, Solicitor and Tax Consultant Aisling Meehan does not accept responsibility for errors or omissions howsoever arising. Tel: 061 368412

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