# Separating, but remaining married



## Mr Eastwood (1 May 2022)

My wife and I are going to remain married for the rest of our lives, but going to live in separate properties. She is going to remain in the family home, and I am going to buy a small property.

We have a will whereby everything goes to the surviving spouse, and that is going to remain in force by agreement of us both. As per the will instructions, all assets will pass to our children on the death of both of us

I am in receipt of the full state pension and a private pension of about 11K. My wife is in receipt of about 90% of the state pension, all paid into our joint account. We should have 150K in savings after the property purchase, also in our joint account, and we plan to continue with that. Both of us trust each other without question

I have 4 questions and would greatly appreciate any advice

1/ Will the surviving spouse be liable for inheritance tax on the death of the other spouse?

2/ The family home is in my name only as I purchased it before we married. For decades I have been meaning to inquire about the benefits of putting it in joint names but never got around to it. Should we do that now before I move to the other property?

3/ Should the purchase of the new property be in my name only or in joint names - I strongly suspect joint names is the correct answer given our circumstances and wishes.

4/ Is there any negative tax implication (or indeed non tax implications) in our plans.

Thanks to all in advance


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## Clamball (1 May 2022)

I think it will be simpler when one spouse dies if all assets are in joint names.  Although the deeds of you ppd is in your name currently your spouse has a lot of protection under the family home protection act.  When you plan to live separately but still married that protection is gone, so she would be exposed to a risk of you selling it without her consent.  So before you move to your new home regularise the current home into joint ownership.  

It sounds as if you both need independent legal advice.  You will be buying a property jointly, making joint wills, and coming to some arrangement on funding both lifestyles and home.  

So put ppd into joint names
Purchase second home jointly
Make the wills
Agree on finances
Move out

When one spouse dies everything goes to the other spouse.  It should be very stress free.  And as you are both still married there should be no tax implication at all.  

It is great that there is a lot of trust between you, but would either of you plan to enter into another relationship then that might change things.


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## NoRegretsCoyote (1 May 2022)

Mr Eastwood said:


> We have a will whereby everything goes to the surviving spouse, and that is going to remain in force by agreement of us both. As per the will instructions, all assets will pass to our children on the death of both of us


This is not an easy situation or a decision you or your wife could have come to lightly of course.

If I read it correctly the main reason you are not divorcing is to take advantage of the spousal exemption for capital acquisitions tax, and therefore preserve wealth for your kids.

I wonder is a better solution judicial separation? You are unable to re-marry and you can take advantage in due course of the spousal exemption for CAT. A JS would put a legal structure on the rest of your financial arrangements. I know you trust each other now but things can change over time and it might be better.

Something to think about is the Fair Deal scheme as well which it's likely one or other of you will need. I don't know the eligibility well but you need to reflect if you would be treated best as divorced, judicially separated, or married.

Finally it's worth taking (separate) legal advice on this but bear in mind solicitors have a vested interest in a more complicated solution where people are adversarial, not a simple one.


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## Mr Eastwood (2 May 2022)

Clamball and NoRegretsCoyote, thanks very much to both of you


Clamball said:


> so she would be exposed to a risk of you selling it without her consent.


That absolutely would not happen. However I fully accept your advice is wise.
You say make the wills. We both have wills already and I think they should cover all eventualities. Everything goes to the surviving spouse, and on the death of both of us, all goes to our children.


NoRegretsCoyote said:


> This is not an easy situation or a decision you or your wife could have come to lightly of course


Thanks for your thoughtful words. Yes indeed, it is a very painful decision.


NoRegretsCoyote said:


> If I read it correctly the main reason you are not divorcing is to take advantage of the spousal exemption for capital acquisitions tax, and therefore preserve wealth for your kids


That would certainly be top of our priorities. Both of us feel that when one of us dies, our assets are in safe hands with the surviving spouse, and will be safely passed on


NoRegretsCoyote said:


> I wonder is a better solution judicial separation?


I'm totally unfamiliar with this, will look it up in google. Will also look into the fair deal situation

The main attraction of the route described in my initial question is the simplicity of it. It avoids the stress of dealing with solicitors, who will no doubt recommend maximum protection for both of us. It also avoids the the cost of the legal advice and the cost of whatever procedures they recommend. (that's not to say its not the correct route)

Thanks again to both of you, and all further thoughts welcome


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## NoRegretsCoyote (2 May 2022)

Mr Eastwood said:


> I'm totally unfamiliar with this, will look it up in google.



It was basically the best you could get before divorce was introduced. Details here. The main difference is you can't remarry but you can still avail of the spousal CAT exemption.



Mr Eastwood said:


> It avoids the stress of dealing with solicitors, who will no doubt recommend maximum protection for both of us.


There are positives and negatives in doing so. If you have a high level of trust then that's a good thing and maybe better left alone.


For my part, if you are financially autonomous, with own houses, and no longer dependent it might make more sense to end the marriage and have your kids inherit directly from you. It's not clear to me why you need the assets to go to the surviving spouse first before inheritance to your kids. If one of you passes away the other shouldn't need the other's house.

Anyway a lot to think about and not easy by any means.


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## Mr Eastwood (2 May 2022)

NoRegretsCoyote said:


> For my part, if you are financially autonomous, with own houses, and no longer dependent it might make more sense to end the marriage and have your kids inherit directly from you. It's not clear to me why you need the assets to go to the surviving spouse first before inheritance to your kids. If one of you passes away the other shouldn't need the other's house.


The value of our existing house is about 4 times the value of the property I propose to purchase. If assets were to be divided equally it would mean selling existing house and buying two properties, something neither of us want, plus, it would be adding further stress to us. Or, my wife keeping existing house, me purchasing new property and keeping all the cash assets, that is also far from ideal. Even though she would have the larger half of the assets, she would be very cash poor.

Also, in the event of the death of one of us, I think it is more desirable for the survivor to inherit the benefit of all the assets, particularly the cash assets, and the lower value property could be converted to cash assets if desired


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## Mr Eastwood (2 May 2022)

Thanks vey much to both of you. Any further thoughts or advice on tax, financial, or legal implications greatly accepted


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## bipped (3 May 2022)

What happens if you were to pre-decease your wife, she inherits everything and then remarries? If she then pre-deceased the new spouse, would your children still inherit all the assets you are trying to protect for them? Is there a way to ensure that? It's good to think of all possibilities, no matter how unlikely they might seem.


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## Mr Eastwood (3 May 2022)

Yes that's an interesting scenario. As you say its good to think of all possibilities, and of course it would be a possibility. In our case I firmly believe it is so unlikely that I can discount it with a good degree of certainty. Thanks very much for your thought.


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## Mr Eastwood (3 May 2022)

Somebody has said to me that even though we will remain married, in the eyes of the state including revenue, we will be de facto not married. Any advice/thoughts on this would be greatly appreciated


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## dereko1969 (3 May 2022)

Mr Eastwood said:


> Somebody has said to me that even though we will remain married, in the eyes of the state including revenue, we will be de facto not married. Any advice/thoughts on this would be greatly appreciated


I'd be fairly certain that somebody is wrong. How old are you and your wife? I can understand this potential approach if you're both in your 70s but if not you've a lot of living yet to do and potentially further relationships that will complicate matters.


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## Mr Eastwood (3 May 2022)

Thank you dereko. not quite in our 70's, but we are both on state pensions


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## NoRegretsCoyote (4 May 2022)

Mr Eastwood said:


> Somebody has said to me that even though we will remain married, in the eyes of the state including revenue, we will be de facto not married.


Married people living apart and having separate finances is not at all unusual.

I don't think Revenue or anyone else could challenge the validity or sincerity of your marriage.


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## Sophrosyne (4 May 2022)

Mr Eastwood said:


> Somebody has said to me that even though we will remain married, in the eyes of the state including revenue, we will be de facto not married. Any advice/thoughts on this would be greatly appreciated



Just to sort income tax first...
The basis on which you would be assessable to income tax depends on whether or not there would be maintenance payments.
Perhaps you would clarify.


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## dereko1969 (4 May 2022)

Sophrosyne said:


> Just to sort income tax first...
> The basis on which you would be assessable to income tax depends on whether or not there would be maintenance payments.
> Perhaps you would clarify.


But they wouldn't be maintenance payments as nothing is being formalised - there is no legal separation so it would just be money from husband to wife or vice versa so nothing to do with Income Tax liabilities.


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## Sophrosyne (4 May 2022)

dereko1969 said:


> so nothing to do with Income Tax liabilities.


Incorrect.


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## NoRegretsCoyote (4 May 2022)

Sophrosyne said:


> Incorrect.


Are payments or asset transfers between spouses taxable in any way?


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## Sophrosyne (4 May 2022)

NoRegretsCoyote said:


> Are payments or asset transfers between spouses taxable in any way?


The Tax Acts distinguish between a couple living together and a couple living apart, regardless of whether the separation is informal or formalized.


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## NoRegretsCoyote (4 May 2022)

Sophrosyne said:


> The Tax Acts distinguish between a couple living together and a couple living apart,


But to what extent would this impact the OP and his wife who wish to live apart but remain married?

Would any payment or transfer of assets be taxable? I'm open to correction but I can't see it.


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## Mr Eastwood (4 May 2022)

Sophrosyne said:


> Just to sort income tax first...
> The basis on which you would be assessable to income tax depends on whether or not there would be maintenance payments.
> Perhaps you would clarify


Hi Sophrosyne, to clarify, Our preferred plan is to remain married, My wife's pension and my two pensions are been paid into our joint account. Both of us have cash access to this account, and we have debit cards on that account. Neither of us would be reckless spenders, we are fairly equally matched in that regard


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## Sophrosyne (4 May 2022)

Hi Mr Eastwood,

From a Revenue standpoint you would be regarded as married but living apart.

There are different rules for different taxheads.

For income tax, you would be assessed as two single individuals (Separate Treatment). You could not, for instance, opt to be jointly assessed as this is only available to married couples who live together or who, if living apart, pay legally enforceable spousal maintenance payments.

The significance is that for *income tax*, you could not share or transfer tax credits or rate bands, even where one of you does not fully use those credits or rate bands.

Special rules apply in the year of separation.

If you intend to transfer any assets to each other *during your lifetimes*, remember that the *CGT* spousal exemption only applies where the asset is transferred while you are still living together. Any assets transferred subsequent to that date will incur a liability on the spouse who transfers the asset.

Your separation has no effect on *CAT *and so spousal exemptions would apply.

Since yours is an informal separation, Revenue will treat you as living apart from the date that arrangement is likely to be permanent. That date is up to you.


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## Mr Eastwood (5 May 2022)

Hi Sophrosyne,

Thanks for your detailed explanation. I would appreciate it if you could clarify a few of the points you made.


Sophrosyne said:


> The significance is that for *income tax*, you could not share or transfer tax credits or rate bands, even where one of you does not fully use those credits or rate bands.


Ref above, I have a total income about 24.5K My wife has an income of about 11.5K. We have the standard credits. Would you know if either or both of us will pay more income tax when separated.



Sophrosyne said:


> If you intend to transfer any assets to each other *during your lifetimes*, remember that the *CGT* spousal exemption only applies where the asset is transferred while you are still living together. Any assets transferred subsequent to that date will incur a liability on the spouse who transfers the asset.


CGT meaning "capital gains tax". what is CGT spousal exemption, and how does it come into play with an asset transfer between spouses. I can understand how CAT comes into play

Thanks in advance


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## Sophrosyne (5 May 2022)

Capital Gains Tax is charged on the _disposal_ of assets. It is charged on the person disposing of the asset.

Disposal means disposal by any means, e.g., by sale, by gift, etc.

It is very common for people who are separating to overlook Capital Gains Tax because they assume that transferring or gifting assets to each other after they separate and during their lifetime has no tax consequences. They often put off what they should have done before they separated.

While you are living together it has no consequences as asset transfers between spouses who are living together are, generally, exempt from CGT.

However, once you separate, that exemption ceases.

Regarding income tax, from what you say, your joint income is equal to the exemption limit for married couples, €36,000 and so you are not currently paying any income tax. Is that correct?


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## Baby boomer (5 May 2022)

Sophrosyne said:


> Hi Mr Eastwood,
> 
> From a Revenue standpoint you would be regarded as married but living apart.


What exactly is the Revenue definition of "living apart?"  The Courts have, for Family Law purposes, accepted that you can be "living apart" but still under the one roof at the one address.    Would this count?  

Conversely, you could have a situation where spouses are very much married but actually living (perhaps temporarily) in different locations, maybe for work reasons or such.  

If living together/apart becomes a contested issue, where does the burden of proof lie?  And does this tend to be a contentious area?


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## Sophrosyne (5 May 2022)

Usually, the couple agree that they are living apart, even if living in the same property.

As mentioned, Revenue will treat them as living apart if and when the couple agree that it will be on a permanent basis.

There might be contention, but that is not a matter for Revenue, but rather mediation or the Courts.


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## Mr Eastwood (5 May 2022)

Hi Sophrosyne, Thanks again for your valuable advice. 


Sophrosyne said:


> While you are living together it has no consequences as asset transfers between spouses who are living together are, generally, exempt from CGT.
> 
> However, once you separate, that exemption ceases.


Normally CGT is payable on a *gain* on assets when sold or gifted, but one's private principle residence PPR is exempt from this. Is it the case that if I transfer the house (our PPR) that we have lived in for decades into both names after we separate, that CGT will be payable on the full gain since purchase, or will it be payable on half the gain as it will not be a full transfer to my wife, but rather we will each own half the house.

Or would it be the case that CGT would be due only on the gain (or half the gain as the case may be) in value since the date of separation. 
Either way the message I'm getting from you is, transfer to both names before separation.

The points you have made have raised a few more questions in my head. If the transfer is done to both names, and the new property is bought in joint names, will both properties be considered PPR's

If either our existing house, or the future new property, both in joint names is sold at a future date will CGT be payable on either property.

If in the future one of us want to move, that is sell one property and buy another, again in joint names will there be any complications, tax wise or otherwise. 

If in the future the existing more valuable house is sold, and my wife down grades to a smaller property leaving a cash surplus, can that cash be transferred into our joint bank account without penalty.

Ref your income tax question. I paid about €1400 tax last year as I did some part time work. I am also doing some work this year, but possibly will not be doing any from next year onwards.

Thanks very much again


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## Sophrosyne (8 May 2022)

There are a numerous issues, a few are:

_Full_ PPR exemption applies only where the individual lives in the property for the entire ownership period, otherwise it is apportioned.

Transferring a share of an asset is a part disposal with special computational rules.

An individual can only have _one_ principal private residence (PPR) at any one time.

If you intend to transfer assets to each other after you cease to live together, then you really should seek professional advice.


Regarding Income Tax, you spouse’s income is under the single exemption limit, €18,000 and so is exempt from Income Tax.

As your income exceeds that limit, exemption will not apply, and you will be entitled to the tax credits and rate bands appropriate to a single individual.


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## Clamball (8 May 2022)

The fact that Mr Eastwood plans to remain married but live separately is not being taken into consideration here.   For a married couple who are living separately to be taxed as single from the date of separation they must also have a clear intention to end the marriage, which Mr Eastwood says is clearly not their plan currently.  

If one of a couple ended up in a nursing home they are still married but living separately, so lots of examples of this.

Some interesting information here:  


			https://doylekeaney.ie/wp-content/uploads/2020_Irish-Tax-Review_Issue_4-E03-AJC2.pdf
		


It says “_there is provision for separated spouses to elect to be jointly taxed for income tax purposes but that option is not available for capital gains tax purposes”_

It still makes sense to me for both houses to be in joint names before making the move to live separately.


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## Sophrosyne (8 May 2022)

Clamball said:


> The fact that Mr Eastwood plans to remain married but live separately is not being taken into consideration here. For a married couple who are living separately to be taxed as single from the date of separation they must also have a clear intention to end the marriage, which Mr Eastwood says is clearly not their plan currently.


That is _exactly _what is being taken into consideration here.

He will be married but living apart. In his situation he cannot elect to be jointly assessed. See post #21


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## Mr Eastwood (9 May 2022)

Hi Sophrosyne & Clamball

I never dreamt that a married couple deciding to live in two separate properties could be such a minefield. Every question answered raises further questions.

Thanks for for your patience and your professional advise so far, would you be kind enough to answer a few more questions.


Sophrosyne said:


> Since yours is an informal separation, Revenue will treat you as living apart from the date that arrangement is likely to be permanent. That date is up to you.


Is it totally up to my wife and I to declare when the separation is likely to be permanent, e.g. could we declare this in 10yrs time, and in the meantime preserve all the benefits of a married co-habiting couple?

Following your advice I am going to transfer our existing house to joint names, however I am finding the payment of CGT somewhat difficult to grasp and am curious as to the workings of it. As a working example, assuming our house has gained 400K in value since purchase by me in my sole name. If I transferred that house to both names 1 day after separation, what CGT would be due? If I transferred to both names 5yrs after separation, when it has gained a further 100K in value, what CGT would be due?

If we separate and declare to revenue that it is likely to be permanent, hypothetically, could we reunite in future years and return to the tax treatment of a normal married couple?



Sophrosyne said:


> An individual can only have _one_ principal private residence (PPR) at any one time.


I have no problem understanding the above, my question really is: considering both our existing house and the future new property will be in joint names, will our existing house be considered a PPR for tax purposes as long as my wife lives in it, and likewise for the new property as long as I live in it?

Thanks Clamball for the link re tax for separated couples, very useful article. Is it your understanding from that article, that separated couples can elect to be treated jointly for income tax purpose? Its a bit unclear to me.

Thanks to all in advance


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## Sophrosyne (9 May 2022)

You need to dismiss the opinion of anyone who is giving you the false impression that you have the option to elect to be jointly assessed.

From Revenue’s website:

“*Separation, divorce or dissolution of civil partnership*
When you separate, divorce or dissolve your civil partnership, you can choose to be treated as married or in a civil partnership for tax purposes. To claim this treatment, you should:


send written notification, signed by both partners, to Revenue by the end of the tax year
*be paying legally enforceable maintenance payments*
both be resident in Ireland
not have re-married, if you are divorced. This also applies to your former spouse or civil partner.”

Indeed, in linked article to Doyle Keaney Tax Advisors states:

“Separated spouses are treated as singly assessed from the date of separation unless they have validly elected for joint assessment *and maintenance payments are made under a legally enforceable arrangement.”*


Turning to Capital Gains Tax, obviously, if you don’t transfer assets to each other after you separate and during your lifetime then there can be no occasion for a CGT charge.

If you do, as mentioned, you need to engage the services of a professional who will tailor advice to your situation and with whom you can discuss various options.



Mr Eastwood said:


> I never dreamt that a married couple deciding to live in two separate properties could be such a minefield. Every question answered raises further questions.



The concluding paragraphs of the linked article to Doyle Keaney Tax Advisors quite rightly states:

“The taxation of relationships and their dissolution can be complicated. The complications arise from the fact that there are no uniform rules under the various tax heads, with different rules applying to cohabiting couples and married couples and the tax rules varying from the legal rules. The impact of the different rules cannot be underestimated and, as with all things law and taxation, timing is of the essence. It cannot be overstated how important timely advice is to manage the tax impact and tax exposures for both parties in what is already undoubtedly a hugely charged situation.”


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## Mr Eastwood (12 May 2022)

Hi Sophrosyne, I have had a very busy few days.

Thanks very much for your valuable professional advice. Your link to the revenue site was very useful. As per your recommendation I will indeed get professional advice. Also, things are in motion to put our existing house in joint names

In the meantime if you have the time (and the patience) I would be very interested in your views on the questions I have raised above, I have copied them in below again.

Considering both our existing house and the future new property will be in joint names, will our existing house be considered a PPR for tax purposes as long as my wife lives in it, and likewise for the new property as long as I live in it?

If I'm correct my understanding is that separation is effective for tax purposed, from the date my wife and myself declare to revenue that it is likely to be permanent. If that's the case, is it totally up to my wife and I to declare when the separation is likely to be permanent, e.g. could we declare this in 5 or 10yrs time, and in the meantime preserve all the benefits of a married co-habiting couple?

Thanks in advance


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## Sophrosyne (12 May 2022)

Mr Eastwood said:


> Considering both our existing house and the future new property will be in joint names, will our existing house be considered a PPR for tax purposes as long as my wife lives in it, and likewise for the new property as long as I live in it?


In short, no.

A married couple who are living together can have only one principal private residence.

A married couple who are living apart in such circumstances that the separation is likely to be permanent can each have a principal private residence from the date of separation.

That should answer your second question.


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## Mr Eastwood (12 May 2022)

Once again Sophrosyne, thank you very much for your clear answer.

When you say "that should answer your second question" I think you may have have been answering from the perspective of CGT/PPR. When I asked the second question I was thinking of joint assessment for *income tax *purposes*. *I know you have already made it quiet clear that I should dismiss any false impression that we have the option to elect to be jointly assessed, but to be nitty gritty, can we remain jointly accessed until both of us declare to revenue that our separation is likely to be permanent. If we delayed that declaration, no doubt we would lose the CGT exemption from the date we start to live in separate properties.

I have numerous questions I could ask, but you have been very helpful so far and I wont tax you any further (pun intended)

Again, thanks in advance.


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