My fiancé died before we got married. He made me the executor of his estate and one of the primary beneficiaries. Now, I am regarded as a complete ‘stranger’, and once his pension (ARF) is liquidated (at full income tax rates, including USC and PAYE to a maximum of 52%), I have to pay 33% in inheritance tax on the balance. Is there a way to avoid paying so much tax? Is there a way for me to be classed as a qualifying cohabitant ‘after’ probate is granted (If I apply to the courts now to be recognised as a qualifying cohabitant, that means I have to rescind my role as executor and my rights to my fiancé’s will.) I appreciate any help you can provide.
Inheritance tax: qualifying as a cohabitant to with deceased fiancé
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Brendan Burgess
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I don't understand the rest of your post but this seems wrong to me.
You can withdraw from being an Executor but that does not make the will invalid nor does it reduce your entitlements under the will.
Brendan Burgess
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From https://www.citizensinformation.ie/...ly for court orders,a child with your partner
If your relationship ended 2 years or more before the death or your ex-partner, you may only apply to the court for a portion of their estate if you were financially dependent on them, for example, you had been getting a maintenance payment from them, or had applied to the court for a maintenance, property or pension adjustment order.
A gift or inheritance taken on foot of a court order under Part 15 of the Civil Partnerships and Certain Rights and Obligations of Cohabitants Act 2010 is exempt from Capital Acquisitions Tax (CAT).
Some examples to which the CAT exemption apply are:
Inheritance
In certain circumstances, if your partner dies when you are still in a relationship together, you can apply to the court for a portion of their estate, but it is not necessary to prove that you were financially dependent on them. You must apply within 6 months after the probate or administration is first granted.If your relationship ended 2 years or more before the death or your ex-partner, you may only apply to the court for a portion of their estate if you were financially dependent on them, for example, you had been getting a maintenance payment from them, or had applied to the court for a maintenance, property or pension adjustment order.
A gift or inheritance taken on foot of a court order under Part 15 of the Civil Partnerships and Certain Rights and Obligations of Cohabitants Act 2010 is exempt from Capital Acquisitions Tax (CAT).
Some examples to which the CAT exemption apply are:
- Transfer of property
- Maintenance payments
- Property or pension adjustment orders
- A benefit from the net estate of a deceased cohabitant
Brendan Burgess
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OK, so if the Court defines you as cohabiting couple, then you would not be paying CAT on your inheritance.
Not sure what the process is to define you as a cohabiting couple, but I don't see why you can't be an Executor and still be a Cohabiting Couple, but I am not a solicitor.
Not sure what the process is to define you as a cohabiting couple, but I don't see why you can't be an Executor and still be a Cohabiting Couple, but I am not a solicitor.
I am familiar with a similar situation some years back. The relationship was in place for 6 years, cohabiting for 5. The deceased had included the partner in their will but as they were not married or in a civil partnership they had to pay 33% inheritance tax on the value of the inheritance, which was substantial.
They got legal advice on trying to be considered a cohabiting couple from the inheritance tax perspective but the legal position was more to do with family law, and protecting children and partners where there was no will. Even cohabiting couples are subject to the 33% CAT tax on inheritances as they are not married or in civil partnerships.
See this link for info.
www.citizensinformation.ie
(I am not a lawer or tax person)
They got legal advice on trying to be considered a cohabiting couple from the inheritance tax perspective but the legal position was more to do with family law, and protecting children and partners where there was no will. Even cohabiting couples are subject to the 33% CAT tax on inheritances as they are not married or in civil partnerships.
See this link for info.
Rights of cohabiting couples (couples living together)
Couples living together have some rights and obligations, but they do not have the same rights and obligations as married couples or civil partnerships
(I am not a lawer or tax person)
What Stitcher said. The Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 Pt 15 is mainly about protecting cohabitants in the event of relationship breakown, which of course never happened in Louis's case. It deals give the courts power to award maintenance to qualifying cohabitants, make property adjustment orders in their favour, etc. It does also cover cases of death; if a surviving qualifying cohabitant reckons they have been left high and dry by being omitted from their deceased partner's will or getting only a trivial amount under it, they can apply to court for an order that proper provision be made for them out of the estate. .
Pt 15 doesn't deal with tax at all, but it's supplemented by Capital Acquisitions Consolidation Act 2003 s. 88A, which says that a gift or inheritance to a qualified cohabitant that is ordered by the court under Pt 15 is exempt from CAT.
It wouldn't be enough for Louis to get an order from the court saying that they are a qualified cohabitant of the deceased. They would also have to get an order giving them a part of the deceased's estate. The court can only make that order if it is satisfied that the deceased failed to make proper provision for Louis, which is a problem, since the deceased made Louis one of the primary beneficiaries of their estate. Plus, the max that the court could order for Louis is what a spouse would get as a legal right under the Succession Act, which may be less than what the will gives Louis. So I think Louis is snookered here; I don't see a realistic pathway to a Pt 15 order, which means CATCA s. 88A won't apply to the case.
And there's no parallel provision in CATCA saying that a gift or inheritance freely given to a qualified cohabitant is exempt from CAT. The thinking there, evidently, is that if the couple wanted a CAT exemption they shoulda put a ring on it. (See also: joint assessment for income tax purposes.)
A couple of other "it's too late to say that now" points:
1. If you're in a situation where you're looking at the possiblity of a big CAT hit in these circumstances and, for whatever reason, you can't or don't want to avoid it by marrying, you can get insurance for that. Not free but, depending on the circumstances, can be a lot less than the CAT hit would be. It can be useful, e.g., if you intend to marry but not for a couple of years, since the risk of one of you dying in the next couple of years is usually quite low, and the cost of insuring agains that risk will be commensurately low.
2. The solicitor who drew up these wills for Louis and their fiancé should have pointed out this issue. The couple could then have taken a decision about whether to accelerate their wedding plans or take out insurance or whatever. If Louis and their fiancé took professional estate planning advice and this issue wasn't raised with them — well, I hesitate to encourage anyone to embark on a prefessional negligence claim (it will take years, and suck all the joy and energy out of your life) but that option is there.
Pt 15 doesn't deal with tax at all, but it's supplemented by Capital Acquisitions Consolidation Act 2003 s. 88A, which says that a gift or inheritance to a qualified cohabitant that is ordered by the court under Pt 15 is exempt from CAT.
It wouldn't be enough for Louis to get an order from the court saying that they are a qualified cohabitant of the deceased. They would also have to get an order giving them a part of the deceased's estate. The court can only make that order if it is satisfied that the deceased failed to make proper provision for Louis, which is a problem, since the deceased made Louis one of the primary beneficiaries of their estate. Plus, the max that the court could order for Louis is what a spouse would get as a legal right under the Succession Act, which may be less than what the will gives Louis. So I think Louis is snookered here; I don't see a realistic pathway to a Pt 15 order, which means CATCA s. 88A won't apply to the case.
And there's no parallel provision in CATCA saying that a gift or inheritance freely given to a qualified cohabitant is exempt from CAT. The thinking there, evidently, is that if the couple wanted a CAT exemption they shoulda put a ring on it. (See also: joint assessment for income tax purposes.)
A couple of other "it's too late to say that now" points:
1. If you're in a situation where you're looking at the possiblity of a big CAT hit in these circumstances and, for whatever reason, you can't or don't want to avoid it by marrying, you can get insurance for that. Not free but, depending on the circumstances, can be a lot less than the CAT hit would be. It can be useful, e.g., if you intend to marry but not for a couple of years, since the risk of one of you dying in the next couple of years is usually quite low, and the cost of insuring agains that risk will be commensurately low.
2. The solicitor who drew up these wills for Louis and their fiancé should have pointed out this issue. The couple could then have taken a decision about whether to accelerate their wedding plans or take out insurance or whatever. If Louis and their fiancé took professional estate planning advice and this issue wasn't raised with them — well, I hesitate to encourage anyone to embark on a prefessional negligence claim (it will take years, and suck all the joy and energy out of your life) but that option is there.
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Dr Strangelove
Registered User
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It’s too late now but life insurance when you’re relatively young and for a short period is cheap.
I got single life cover for a male early 40s for ten years for €300k at €22 a month. That’s a cost of 0.1% of the amount covered per year.
Brendan,
Thank you for your fantastic reply and for taking the time to address my query. I'm very grateful.
And also to the other responders - thank you (and especially to Tom).
I have one final question- is it correct that my fiancé's pension (ARF) has to be liquidated in their name, subject to income tax, USC and PAYE, and I then have to pay a further 33% on the liquidated balance of their pension when I receive it as inheritance- It seems very unjust to be taxed on the double.
Or can I transfer the pension into my name as an ARF?
Once again, I am very grateful to you all for your time and expertise.
Thank you for your fantastic reply and for taking the time to address my query. I'm very grateful.
And also to the other responders - thank you (and especially to Tom).
I have one final question- is it correct that my fiancé's pension (ARF) has to be liquidated in their name, subject to income tax, USC and PAYE, and I then have to pay a further 33% on the liquidated balance of their pension when I receive it as inheritance- It seems very unjust to be taxed on the double.
Or can I transfer the pension into my name as an ARF?
Once again, I am very grateful to you all for your time and expertise.