Will I have to pay gift tax if I am common law partner on house deeds?

Thomas OBrien01

I am living with my partner for over 10 years and we are not married. We bought a house together and own it fifty/ fifty. I recently discovered that the deeds are listed as common law partners instead of joint owners.
If my partner dies or I die, will I have to pay gift/inheritance tax on my property.
Can someone advise me.
Thank you

Peregrinus

The deeds almost certainly list you as "tenants-in-common", which is technical jargon. It has nothing to do with your sleeping arrangements, or being common-law partners in the conjugal sense. It means that each of you can dispose of your share separately. In theory you are free to sell your half-share (though in practice nobody would buy it from you unless they were also buying your partner's share from them). More realistically, you can leave your half-share on your death to someone other than your partner. If you were "joint tenants", which is the alternative form of co-ownership in Ireland, you would each have a right of survivorship, meaning that whichever of you dies first, the other becomes sole owner of the property.

If your partner dies, you will continue to own the half-share you already own - no change there. You may inherit your partner's share, if your partner has made a will leaving it to you. (You won't inherit it, obviously, if you partner makes no will, or makes a will leaving it to someone else.)

If you don't inherit your partner's share, obviously there will be no inheritance tax liability. If you do inherit, there could be a liability to inheritance tax. But if, at the date of your partner's death, you have been living in the house as your sole or main dwelling for at least three years, if you continue to live in it for at least a further six years, and if you don't own any other dwelling house or a share in any other dwelling house, then you should qualify for the "family home" exemption, and have no liability to inheritance tax.

This means that, whichever of you dies first, the other won't be able to move house for at least six years without risking a large inheritance tax bill. That might not be ideal, so you might like to consider a bit of estate planning, and possibly converting your tenancy-in-common into a joint tenancy.

Uno my Uno.

"Tenants in common" is much more than technical jargon, these are operative words and they determine how the property is owned. tenants in common each own a certain share of the property eg 50%. Join tenants however both own ALL of the property.

It is exceptionally unusual for couples such as yourself to be tenants in common and if in fact you are, it is almost certainly because your solicitor made an error when you bought the property.

If you are Tenants in common there may be an inheritance tax issue, this would not arise if you were Joint Tenants. As mentioned above tax relief may be available however.

You and your partner should see your solicitor to clarify the matter and receive appropriate tax and inheritance advice.

Uno my Uno.

Peregrinus wrote: »

This means that, whichever of you dies first, the other won't be able to move house for at least six years without risking a large inheritance tax bill. That might not be ideal, so you might like to consider a bit of estate planning, and possibly converting your tenancy-in-common into a joint tenancy.

That's not quite right, you can sell and move and still get the tax relief but only if it's your only property and only for the amount of the money you use to buy the new property. So if you sell and use half the money to buy s new house you have to pay tax on the other half.

Thomas OBrien01

I don't plan on ever selling or moving. I am on the pension. I am afraid I will owe the taxman inheritance tax on my partners half if she dies or I go first .

Uno my Uno.

Thomas OBrien01 wrote: »

I don't plan on ever selling or moving. I am on the pension. I am afraid I will owe the taxman inheritance tax on my partners half if she dies or I go first .

No body here can answer that question. To give you a correct answer it would be necessary to see your title deeds and get other information. You should speak to your solicitor, phone them, they will be happy to help you.

Peregrinus

Thomas OBrien01 wrote: »

I don't plan on ever selling or moving. I am on the pension. I am afraid I will owe the taxman inheritance tax on my partners half if she dies or I go first .

You won't owe any tax if you die first, but your partner might. If she dies first, you might.

Having said that, if this is the only or main residence for both of you and the only property either of you own, there's an excellent prospect of coming within the family home exemption, so that neither of you will have a tax bill. But it would definitely be worth your while (and your money) to talk to an accountant or a lawyer to get advice on what (if anything) you need to do to make sure you benefit from the exemption.

Thomas OBrien01

I was looking at the family home exemption on the revenue webpage and I should qualify for it as its my main residence for so many years . I shall check with my solicitor and find out why he did not mention this to me.

Sala

I thought dwelling house exception only applied when the disposer didn't live there? I know it doesn't make much sense from a fairness perspective, but I recall a probate lecturer saying it was badly designed and didn't fulfil it's purpose- ie allowed rich parents to gift houses tax free but not the family home?

"Gifts taken on or after 20 February 2007: Any period during which a donee occupies a house that was during that period the disponer's only or main residence will be disregarded as a period of occupation in that house unless the disponer is compelled, by reason of old age or infirmity, to depend on the services of the donee for that period. Old age refers to a person aged 65 or over."

Thomas OBrien01

Update to my post..... I found out that I need to get my solicitor to "execute a deed of transfer" of owner title on my house. It is a simple form that gets filled in and everything in the deeds is changed to joint owners.

Thomas OBrien01

Update to my post..... I found out that I need to get my solicitor to "execute a deed of transfer" of owner title on my house. It is a simple form that gets filled in and everything in the deeds is changed to joint owners.
Thanks you guys for your input and really grateful

Sala

I didn't think that was your question- it's is easy to transfer the property from tenants in common into a joint tenancy, but it doesn't cure the tax issue. In a joint tenancy the property passes outside the estate so you will automatically get it, but not be exempt from the tax on it. Partners are strangers on law and the tax free threshold is circa 15000, anything above that is taxes.

I'm far from a tax expert but I've tried to have a look around and as far as I can tell unmarried joint tenants are liable to tax on the share they receive on death. And I don't know if dwelling house applied as I stated above. Check with revenue maybe

Peregrinus

Yes. Converting the tenancy-in-common into a joint tenancy assures both members of the couple that whichever of them survives the other will end up as sole owner of the entire property. But it doesn't affect tax liablities.

To avoid inheritance tax, they are going to have to rely on the "family home" exemption. I take your point in post #9 that there may be a problem here, and the OP should probably discuss this with his solicitor.

Uno my Uno.

Sala wrote: »

I didn't think that was your question- it's is easy to transfer the property from tenants in common into a joint tenancy, but it doesn't cure the tax issue. In a joint tenancy the property passes outside the estate so you will automatically get it, but not be exempt from the tax on it. Partners are strangers on law and the tax free threshold is circa 15000, anything above that is taxes.

I'm far from a tax expert but I've tried to have a look around and as far as I can tell unmarried joint tenants are liable to tax on the share they receive on death. And I don't know if dwelling house applied as I stated above. Check with revenue maybe

Peregrinus wrote: »

Yes. Converting the tenancy-in-common into a joint tenancy assures both members of the couple that whichever of them survives the other will end up as sole owner of the entire property. But it doesn't affect tax liablities.

To avoid inheritance tax, they are going to have to rely on the "family home" exemption. I take your point in post #9 that there may be a problem here, and the OP should probably discuss this with his solicitor.

You are both incorrect in this. If the OP and their Partner are Joint Tenants then they both own all the property, therefore if one of them were to pass away the other does not inherit or receive any property because they already own it, the deceased partner's ownership is simply extinguished. As no property is transferred there is no taxable event and therefore no Tax Liability.

Thomas OBrien01

I spoke to my solicitor yesterday and he reckons once we are not married we would fall into category c of the tax table which is 2 strangers living together . We would have to pay 33 per cent tax on 50 per cent of our house and savings after the 15 threshold.

Marcusm

Thomas OBrien01 wrote: »

I spoke to my solicitor yesterday and he reckons once we are not married we would fall into category c of the tax table which is 2 strangers living together . We would have to pay 33 per cent tax on 50 per cent of our house and savings after the 15 threshold.

Point your solicitor to this and perhaps suggest to him/her that they should abate their fees.

http://www.revenue.ie/en/tax/cat/leaflets/cat10.html

Sala

That says that after 2007 dwelling house relief will not apply where the donor lived in the property

Spanish Eyes

Uno my Uno. wrote: »

You are both incorrect in this. If the OP and their Partner are Joint Tenants then they both own all the property, therefore if one of them were to pass away the other does not inherit or receive any property because they already own it, the deceased partner's ownership is simply extinguished. As no property is transferred there is no taxable event and therefore no Tax Liability.

That is not correct. The surviving joint owner does not have to take out probate for the inheritance of the deceased joint owner's share, (falls outside the will or intestacy),but the survivor does indeed take an inheritance of the deceased partner's share and may have a CAT liability.

Spanish Eyes

Sala wrote: »

That says that after 2007 dwelling house relief will not apply where the donor lived in the property

Only in the case of a GIFT, not an inheritance.

Spanish Eyes

Marcusm wrote: »

Point your solicitor to this and perhaps suggest to him/her that they should abate their fees.

http://www.revenue.ie/en/tax/cat/leaflets/cat10.html

That provision will only apply if the survivor does not own or have an interest in any other dwelling house at the date of death of the joint owner.

Sala

Spanish Eyes wrote: »

Only in the case of a GIFT, not an inheritance.

Thanks I didn't notice that. So cohabitants can avoid cat in both joint and tenants in common situations?

Spanish Eyes

Sala wrote: »

Thanks I didn't notice that. So cohabitants can avoid cat in both joint and tenants in common situations?

I would call it qualifying for the Dwelling House Exemption.

An inheritance of a dwelling house or part of a dwelling house will qualify once the conditions are met. That applies to a direct bequest, survivor in a joint tenancy or an inheritance of the share of a tenant in common. And indeed to a share on intestacy too.

Remember though that a joint tenancy ensures that the survivor will inherit, whereas a tenancy in common means that the deceased owns his or her share in their own right, and they can leave it to whoever they wish. In other words it does not pass automatically to the survivor as in a joint tenancy.

So, unless the deceased tenant in common has left his or her share to the partner in a will, it may go on intestacy and that would not be to the surviving partner under the Succession Act. The tenant in common can leave the share in a will though, to whoever they wish.

Just something to be aware of out there!

Make a will. It can be so important. But obviously get legal advice in these circumstances too. A bit of a minefield if you ask me.

Uno my Uno.

Spanish Eyes wrote: »

That is not correct. The surviving joint owner does not have to take out probate for the inheritance of the deceased joint owner's share, (falls outside the will or intestacy),but the survivor does indeed take an inheritance of the deceased partner's share and may have a CAT liability.

Not if they are joint tenants! In that case There is no transfer of any property or Interest in the property because the survivor already owns all of the property and is not taking the deceased partners share. Therefore there is no CAT liability. You said yourself it doesn't happen under will or intestacy.

In the case of joint tenancy nothing passes, the deceased persons rights to the property are extinguished by the effect of survivorship.

Spanish Eyes

Uno my Uno. wrote: »

Not if they are joint tenants! In that case There is no transfer of any property or Interest in the property because the survivor already owns all of the property and is not taking the deceased partners share. Therefore there is no CAT liability. You said yourself it doesn't happen under will or intestacy.

In the case of joint tenancy nothing passes, the deceased persons rights to the property are extinguished by the effect of survivorship.

I think you are so wrong. Why is the question asked in relation to joint property on the CA24 then (Inland Revenue Affidavit) if there are no tax implications?

All a joint tenancy does is ensure it passes to the survivor, it does not mean that no benefit passes on death that may be subject to inheritance tax.

This is an extract from the guide to completing the CA24 document for probate/administration.

Joint tenancy
Joint tenancy means that two or more people have an interest in the property, but do not own their share outright since the title to the property includes the title of the other joint owner(s). A joint tenant cannot sell, gift or lease his/her share of the property without severing the joint tenancy. On the death of one of the joint tenants, the deceased person’s share will automatically pass by survivorship to the surviving joint tenant. The deceased person’s share is not an asset of the estate and should not be included in Part 4 or 5 of the Inland Revenue Affidavit. The benefit taken by the survivor can however have tax implications depending on the amount, group threshold etc. (See Inheritance Tax).

http://www.revenue.ie/en/tax/cat/leaflets/ca25/questions.html

Uno my Uno.

Spanish Eyes wrote: »

I think you are so wrong. Why is the question asked in relation to joint property on the CA24 then (Inland Revenue Affidavit) if there are no tax implications?

All a joint tenancy does is ensure it passes to the survivor, it does not mean that no benefit passes on death that may be subject to inheritance tax.

This is an extract from the guide to completing the CA24 document for probate/administration.

Joint tenancy
Joint tenancy means that two or more people have an interest in the property, but do not own their share outright since the title to the property includes the title of the other joint owner(s). A joint tenant cannot sell, gift or lease his/her share of the property without severing the joint tenancy. On the death of one of the joint tenants, the deceased person’s share will automatically pass by survivorship to the surviving joint tenant. The deceased person’s share is not an asset of the estate and should not be included in Part 4 or 5 of the Inland Revenue Affidavit. The benefit taken by the survivor can however have tax implications depending on the amount, group threshold etc. (See Inheritance Tax).


http://www.revenue.ie/en/tax/cat/leaflets/ca25/questions.html

That refers to the benefit of the property not the property itself, the two are separate things. The benefit of a property maybe income, rents, profits a prendre etc. For example if a property was held in joint tenancy and was leased, and the income from that lease, ie the benefit of the property, was being split between the partners, upon the death of the partner the survivor would receive all of the benefit of the property. That could be subject to CAT, the property itself is not.

I'll give you another example, you and I own a property as Joint tenants, that means that we both own it, not in equal shares, not 50/50 and not in proportion to our contributions, all of these concepts are incompatible wth joint tenancy. If I were to pass away my share of the property is not an asset of my estate, it is not capable of being Willed by me or passed in an intestacy, it will not vest in my executor nor will it be transferred by any assent. What then have you received from me? Nothing, nothing has passed from me to you, what then can you be taxed on? Nothing. Your position in relation to the property has not changed, all that has happened is that my rights have been extinguished by survivorship.

Spanish Eyes

Uno my Uno. wrote: »

That refers to the benefit of the property not the property itself, the two are separate things. The benefit of a property maybe income, rents, profits a prendre etc. For example if a property was held in joint tenancy and was leased, and the income from that lease, ie the benefit of the property, was being split between the partners, upon the death of the partner the survivor would receive all of the benefit of the property. That could be subject to CAT, the property itself is not.

I'll give you another example, you and I own a property as Joint tenants, that means that we both own it, not in equal shares, not 50/50 and not in proportion to our contributions, all of these concepts are incompatible wth joint tenancy. If I were to pass away my share of the property is not an asset of my estate, it is not capable of being Willed by me or passed in an intestacy, it will not vest in my executor nor will it be transferred by any assent. What then have you received from me? Nothing, nothing has passed from me to you, what then can you be taxed on? Nothing. Your position in relation to the property has not changed, all that has happened is that my rights have been extinguished by survivorship.

If nothing passes there can be no CAT liability.

But that is not what you asserted.

Spanish Eyes

@Uno my Uno.

Are you referring to Irish Law here? Just wondered. Thanks.

Uno my Uno.

Spanish Eyes wrote: »

If nothing passes there can be no CAT liability.

But that is not what you asserted.

That's exactly what I asserted.

Uno my Uno.

Spanish Eyes wrote: »

@Uno my Uno.

Are you referring to Irish Law here? Just wondered. Thanks.

Absolutely, with the greatest of respect to yourself and the good people at the Revenue Commissioners the Q & A section of the CA24 is not a reliable source for property law or even tax law for that matter!

Edit: it's not even correct for filling out the form itself!!!!

Spanish Eyes

Uno my Uno. wrote: »

Absolutely, with the greatest of respect to yourself and the good people at the Revenue Commissioners the Q & A section of the CA24 is not a reliable source for property law or even tax law for that matter!

Edit: it's not even correct for filling out the form itself!!!!

I have nothing to do with Revenue. It so happens that they are an intrinsic part of probate/administration though. Revenue is not concerned with property law, only the passing of assets on a death/or gift. I have always found their CAT section to be very knowledgeable and helpful too. The guide at least points out things that you yourself might have totally dismissed regarding Inheritance Tax.

You stated that there is NO inheritance tax on joint property.

quote:
Not if they are joint tenants! In that case There is no transfer of any property or Interest in the property because the survivor already owns all of the property and is not taking the deceased partners share. Therefore there is no CAT liability. You said yourself it doesn't happen under will or intestacy.

In the case of joint tenancy nothing passes, the deceased persons rights to the property are extinguished by the effect of survivorship. unquote

That is incorrect, there MAY be.

Anyway, I think you are gunning for a fight. I'm not. I am just stating the obvious things that people may forget.

The subject of the thread is a non married partnership and a house. That is what I was talking about.

Uno my Uno.

Spanish Eyes wrote: »

I have nothing to do with Revenue. It so happens that they are an intrinsic part of probate/administration though. Revenue is not concerned with property law, only the passing of assets on a death/or gift. I have always found their CAT section to be very knowledgeable and helpful too. The guide at least points out things that you yourself might have totally dismissed regarding Inheritance Tax.

You stated that there is NO inheritance tax on joint property. That is incorrect, there MAY be.

Anyway, I think you are gunning for a fight. I'm not. I am just stating the obvious things that people may forget.

The subject of the thread is a non married partnership and a house. That is what I was talking about.

I'm not gunning for a fight by any means, the things you are pointing out are incorrect and confusing the issue, that is all. I too am talking about a non married partnership and a house, I used other examples for clarity.

There is no inheritance tax (more accurately Capital Aquisitions Tax) on property held in a joint tenancy, as I pointed out there may be a CAT liability on the benefitof the property but that is seperate and in the case of a partnership and house wouldn't apply as both have the full benefit of the house and so can't acquire any further benefit.

In the hypothetical example of an unmarried couple who wish to avoid any potential CAT liability they have a couple of options, the most straight forward being to get married as there is no CAT liability between spouses. If they choose not to do that for whatever reason they should hold their property as Joint Tenants as there is no taxable event if one of the partners becomes deceased. It is not advisable to rely on Dwelling house relief as tax Reliefs may change or be removed entirely.

I have mentioned in this tread already but It's worth restating that couples should always hold property as joint tenants to ensure that their familial interests are protected by the right of survivorship. Equally business partners who own property should always hold as Tenants in Common to protect their interests from the right of survivorship. The OP has been advised as much by his solicitor.

I think I've made my point somewhat exhaustively, I am not trying to advise the OP, merely clear up some of the errors on this tread for the purposes of discussion only, the OP has taken legal advice and they should follow that advise as they see fit, ignoring completely the contents of this tread.

Sala

This is very interesting. I know you don't agree with each other but without wanting to hijack the OPs thread could you give me some links as its something I don't understand. Obviously I misread the dwelling house relief but I really want to find out re joint property, if dwelling house relief wasn't available (i.e. Don't live together) what the tax consequences are. I've pulled out my probate book and it Says "taxation consequences will arise on the passing of property by survivorship". But how much is taxed- 50%??

It also says if one party didn't provide their original 50% share gift tax can arise in original purchase or beneficiary will be deemed to inherit the whole property and be taxed on 100%. This leads me to believe the tax could be on 50% in a joint tenancy if both paid but it doesn't actually say this. I was thinking surely no one keeps track of their exact contributions but since most people would be married or entitled to dwelling house relief, maybe the remaining joint tenancies that fall outside these are more particular about monitoring who paid what (if it's an investment say), but that kinda undermines the whole idea of a joint tenancy, that there aren't fixed shares???

Uno my Uno.

Sala wrote: »

This is very interesting. I know you don't agree with each other but without wanting to hijack the OPs thread could you give me some links as its something I don't understand. Obviously I misread the dwelling house relief but I really want to find out re joint property, if dwelling house relief wasn't available (i.e. Don't live together) what the tax consequences are. I've pulled out my probate book and it Says "taxation consequences will arise on the passing of property by survivorship". But how much is taxed- 50%??

It also says if one party didn't provide their original 50% share gift tax can arise in original purchase or beneficiary will be deemed to inherit the whole property and be taxed on 100%. This leads me to believe the tax could be on 50% in a joint tenancy if both paid but it doesn't actually say this. I was thinking surely no one keeps track of their exact contributions but since most people would be married or entitled to dwelling house relief, maybe the remaining joint tenancies that fall outside these are more particular about monitoring who paid what (if it's an investment say), but that kinda undermines the whole idea of a joint tenancy, that there aren't fixed shares???

I am no longer in possession of my CAT workbooks and don't really wish to pursue this matter any further but the concept of "shares" etc is incompatible with Joint Tenancy, if owners consider themselves as owning 50% of a property or are basing their ownership on contributions they are tenants in common not joint tenants as they will have severed the 4 unities of the joint tenancy.

It may be that I have overlooked something or am otherwise mistaken but I am sure that in any CAT exercise I have ever done and every CA24 I have had the misfortune to complete any Property held in joint tenancy has been excluded. Indeed the section of the CA24 quoted above explicitly states that this should be the case.

It maybe that the Benefit of a specific property is an Aquisition which will have taxation concequences, I've not come across it but I can imagine such a circumstance. Perhaps another practitioner can open my eyes to anything I've missed or what your probate book maybe referring too.

Good discussion, I've enjoyed it.

Sala

Thanks Uno. In not trying to say you're wrong - I just don't understand it and the information I can find isn't totally clarifying the matter. In workshops etc I had no issues with it, as it was usually a husband and wife scenario (no tax) or dwelling house relief. I don't think we ever had a case that was neither.... As far as I can see (and hands up I may be wrong) joint property passing by survivorship may give rise to a tax liability but what that is, or how it's calculated, I honestly can't find any details!!

Sala

Ps I'm not gunning for a fight either whoever said that, I literally can't figure it out, and even if I search the information is very limited. There probably aren't a huge amount of joint tenancies that fall outside the husband/wife or dwelling house scenarios - but even though I haven't come across them in real life theoretically they can legally exist.

Apologies to the OP if I derailed his thread but it appears he got the good info already

Thomas OBrien01

Sala wrote: »

Ps I'm not gunning for a fight either whoever said that, I literally can't figure it out, and even if I search the information is very limited. There probably aren't a huge amount of joint tenancies that fall outside the husband/wife or dwelling house scenarios - but even though I haven't come across them in real life theoretically they can legally exist.

Apologies to the OP if I derailed his thread but it appears he got the good info already

Being OP, I am glad to read your discussion and maybe others can learn from it. Thanks guys.

Mr. Incognito

If you are both paying the mortgage you should certainly both be on title.

You should also register as a cohabitee but it wont exempt the CAT charge.

There is of course an alternative simple form you can fill out to ensure that you have succession rights, and full tax exemptions between you- a marriage cert. If you are not big on the whole marriage thing then dont have a big formal marriage and just see it as a form to fill out to regularize the position.

Dwelling house relief will not apply as the disponer is living with you

http://www.revenue.ie/en/tax/cat/leaflets/cat10.html

Thomas OBrien01

Now I am confused ! I thought dwelling home exemption applied to us as we have been living together for 20 years in same house.

Spanish Eyes

Thomas OBrien01 wrote: »

Now I am confused ! I thought dwelling home exemption applied to us as we have been living together for 20 years in same house.

The home exemption will apply to an INHERITANCE if you are living in the same house, but not to a GIFT in the same circumstances.

Also, the survivor cannot own or have an interest in any other dwelling in order to qualify for the relief. Since you have lived with partner for 20 years, you, or s/he will be ok, provided the person inheriting does not own any other dwelling.

Best of luck.