Rights of a long-term partner to the house they shared after he dies

I

isaacryan

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This is a long story but I’m trying to keep it to the point.

My father passed away in 2022.
He had a partner live with him for 20 odd years. Not a typical relationship, more so just cohabiting together. Not married.

He had a will in place which left the property to me. No mention whatsoever of her nor did he want her mentioned.

My grandparents being executors were going through the process of probate when my grandfather passed away so it’s fallen on my grandmother to be executor.

In the middle of the above process just as grant of probate was given, the woman living in my fathers house got in touch with a solicitor for legal advice as she thought she was going to be thrown out of the house which was never the case.

My grandmother had to get a solicitor as a result as she was served a letter in relation to the property as she is executor.

After a year of going back and forth, I have agreed to let this woman live out her days in the property as she is in ill health.

The biggest issue I now have to deal with is, as we are now back on track to finalise probate and for me to be registered owner of the property, what is going to happen with regards to inheritance tax??
She will remain to live in the property.

I have my own mortgage, wife and 4 kids to pay for with no means of being able to pay astronomical costs for probate costs and inheritance taxes.

Does anyone have any idea what happens here.

I understand the inheritance tax owed is 33% of anything over €335k. But as somebody is still residing there, is there a different avenue available to me as I can’t sell the property?

I’m absolutely terrified that this will devastate me financially and how I’m
Supposed to come up with these costs if the property won’t be sold for years to come
 
It would help if you gave more information about the value of the property

Were there any other assets eg bank accounts or savings?
 
You had no right to give your late father’s partner the right to live in the house for any length unless it was expressly provided for in your late father’s will. His will needs to be followed to the letter.
 
torblednam said:
The house is the OP's; it was willed to him, so he is entirely free to give a right of residence to this lady if he chooses.
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Apologies. I misread the original post.

The executor has an obligation to transfer title of the property to the OP within a reasonable timeframe. This can be kicked down the road a bit if there are no objections but it will ultimately have to be discharged.
 
OK, this is complicated.

The opening position here is that a cohabitant has no automatic inheritance rights; they only get what is left to them in the will, which in this case is nothing.

So, applying this view:

- the OP inherited full ownership of his father's house, free of any right for anyone else to live in it, and his CAT liability is calculated on that basis; and

- separately, and later, the OP is granting a right of residence to his late father's partner. That's a gift from the OP to her, and she has a CAT liablity on the value of that gift. Her CAT will be calculated on the basis that the OP is a stranger to her.

That's not a very satisfactory outcome, given the reality of what went on here. Is there a way to get a better outcome, tax-wise?

Possibly, yes. When a cohabiting relationship is ended by the death of one party (as happened here), while the survivor has no automatic inheritance rights they do have a right to apply to court for provision to be made for them out of the estate. The court can order that provision be made for the survivor out of the deceased's estate.

So, in this case the surviving partner could apply to court for such an order, and the court case could be settled by consent on the basis that the court will order that the surviving partner is to have a lifetime right of residence in the house. And if the court makes that order then the tax situation changes. The suriving partner is treated has having received an inheritance from the deceased equal to the value of the right of residence, and she gets the same $335k allowance that a spouse would get (meaning, almost certainly, she has no CAT liablity) and the OP would be treated as receiving an inheritance from his father of the value of the house less the value of the right of residence for the partner (meaning, a lower CAT liability or even a nil CAT liablity). This would obviously be a better outcome, more in tune with the reality of the situation. The court proceedings need not be expensive since they would be instituted purely for the purpose of being settled, and the settlement is already agreed.

But.

The father died in 2022. And, if the surviving cohabitant wants to take court proceedings looking for provision to be made for her out of the estate, she has to start that within six months of the application for a grant of probate. It's possible that the six-month time limit has passed, so it may be too late to run this through the courts in order to get the more favourable tax treatment.

There are already solicitors involved here on both sides. Run, do not walk, to those solicitors to enquire if court proceedings have been instituted and, if they haven't, whether it is too late to do so now.
 
What does you solicitor advise?

In terms of the right of residence, what legally have you done given the property is not yet in your name?

Regardless of your father's will or intentions, his partner could be referring to the below.

Inheritance rights of cohabiting couples

Cohabiting couples have no automatic right to inheritance on the death of either partner. What are your rights, and find out how you can plan and make provisions for dependants.
www.citizensinformation.ie www.citizensinformation.ie

I assume that you want to take care of this person who was in your father's life fir a significant amount of time. What other options have they explored eg council housing?

This person is in ill health but is expected to live for many years. If the house is worth more than 335k, and you would need to sell to pay the inheritance tax due. Could you sell but buy a smaller, cheaper property for them to live in, giving them a right of residence.
 
Appreciate the replies so far on this. Let me clarify for some of you about the situation.
jpd said:
It would help if you gave more information about the value of the property

Were there any other assets eg bank accounts or savings?
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No other assets or accounts. No valuables either.

House could be around 400k if put on the market
 
If you are treated as inheriting 400k from your father and you have never before had any gifts and inheritances from either of your parents (ignoring gifts with the small gift allowance of 3k per year) then your CAT liablity will be (400k - 335k) x 33% = a shade under 22k. If you can't find that amount down the back of the sofa and you don't want to sell the house there's a good chance you could mortgage it to raise the sum required.

If your father's partner is treated a receivign a gift of a lifetime right of residence from you, the value of that gift will dependn on their age on the date the gift is made and on their sex. There's a handy table of age- and sex-based factors in the legislation for computing the value of a lifetime interest in property. Your father's partner can apply the appropriate factor from that table to work out the amount of the chargeable gift they will receive, and calcuate their CAT liablity on that amount.

As noted, both charges can be avoided if you can get the matter dealt with in court, if it's not too late to do that.
 
TomEdison said:
If you are treated as inheriting 400k from your father and you have never before had any gifts and inheritances from either of your parents (ignoring gifts with the small gift allowance of 3k per year) then your CAT liablity will be (400k - 335k) x 33% = a shade under 22k. If you can't find that amount down the back of the sofa and you don't want to sell the house there's a good chance you could mortgage it to raise the sum required.

If your father's partner is treated a receivign a gift of a lifetime right of residence from you, the value of that gift will dependn on their age on the date the gift is made and on their sex. There's a handy table of age- and sex-based factors in the legislation for computing the value of a lifetime interest in property. Your father's partner can apply the appropriate factor from that table to work out the amount of the chargeable gift they will receive, and calcuate their CAT liablity on that amount.

As noted, both charges can be avoided if you can get the matter dealt with in court, if it's not too late to do that.
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Category A threshold was increased in Oct 24 to 400k
 
Salvadore said:
You had no right to give your late father’s partner the right to live in the house for any length unless it was expressly provided for in your late father’s will. His will needs to be followed to the letter.
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It was my only reasonable option. Having her put out was not my fathers wishes.

Forcing her out would have enabled a lengthy and costly legal process and it would mean selling the house to give her a share. We were advised by a solicitor if we had of gone down this route- “she would have her day in court”

This option would mean everyone loses out financially.

Letting her reside there is so that in due course, I can sell the house at that point in time.
 
thanks all for the responses so far. Been very helpful but I best clarify a few further points

Although there was solicitors involved on both sides, an agreement was made recently so that the cohabitant could remain to reside in the house.

Legal fees have now been issued on both sides.
My grandmothers bill was over €6k!!
Heartbreaking considering she was served a legal letter from the cohabitants solicitor and dragged into this simply because she became executor after my grandfather passed away.

So legally the dispute is over and cohabitant is allowed to reside in the property under certain terms and conditions

So my situation is now us as follows:

My grandmother and I are going to her solicitor soon to sign the papers which technically puts the house in my name.
This is because the grant of probate was issued just before my grandfather passed. We can now finalise this process.

Once the house is in my name, my original question stands.

Are revenue going to hit me with a letter in the post?

Can I defer the inheritance tax based on the situation?
Can the evaluation of inheritance tax be calculated based on an individual residing in the house?

I’m presuming if the inheritance valuation is done taking into account that somebody resides there- does this bring the value of the house down ?

Meaning the tax owed might be less or nothing at all at this stage?

And when the cohabitant passes away or moves into a home- will there be a valuation again at that point?

Also I’m told I will have to pay the solicitors fee for finalising probate.
What kind of money are we talking ?
yet another bill on my plate that terrifies me as I can’t afford it until I have money from the sale of the house

Should I be looking at remortgaging my oen home or taking out a bank loan to pay all these legal fees?

Christ, it’s all so stressful and complicated
 
Keeping this simple for now.

1. You've inherited a house from your late father, which you have chosen not to sell at this time. Is that correct?

2. What value was listed in the Statement of Affairs?

3. Is this value in excess of the current Group A threshold?
 
OP said the house is worth c 400,000, the threshold was 335,000. So there is a taxable element, but this can be reduced. OP=You wont get a satisfactory answer here. Ask the solicitor involved for the estimated costs now that you will have to pay. Bring this plus the value of the house and the written settlement agreement to a tax consultant, they will be able to give specific advice. You should be able to claim a deduction on the value of the house on the basis of the settlement and certainly the costs involved. It depends on the kind of right of residence involved- exclusive, a simple right of residence, a lifetime interest, these have different tax treatments. Tom Edison above suggests getting a court order to rubber stamp the agreement, this would be one way of ensuring a good tax treatment of the settlement but you really need specific tax advice, it's worth paying for this ( and is tax deductible also).
 
isaacryan said:
My grandmothers bill was over €6k!!
Heartbreaking considering she was served a legal letter from the cohabitants solicitor and dragged into this simply because she became executor after my grandfather passed away.
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In case you (or she) are not aware, your grandmother's legal costs incurred in relation to this matter are payable out of the estate.

isaacryan said:
Are revenue going to hit me with a letter in the post?
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CAT is a self-assessment tax. The onus is on you to deal with this proactively (and you risk incurring interest and penalties if you don't). As MHoran379 suggests, you should probably engage an accountant/tax adviser to steer you through this. There may still be opportunities to implement the deal in ways that minimise or eliminate your tax liability. The potential tax liablity is in the €20,000 ball park, so paying for professional advice is amply justified.

As for whether you should be remortgaging your home or taking out loans to pay legal fees (or tax bills) — you've just inherited an asset worth €400k, which even in the worst case scenario is at least ten times more than the associated liability for legal fees and inheritance tax, so you have ample resources, and you're much better off than you were before your father's death. But I get that there's a cash-flow issue — having just agreed that your father's ex can stay in the house for the rest of your life, you can't sell it to meet your immediate costs, and you may not be able to sell it for many years. So, there's a few steps to take.

Step 1 is to minimise your costs, by exploring all options to reduce your inheritance tax bill, as already suggested. This is time-critical; you should do it immediately. And it's the one step that could make the biggest improvement to your situation here. So close your phone/tablet/laptop/desktop right now and go directly to a tax adviser. Do not pass go. Do not collect £200.

Step 2 is to establish what proportion of the costs you could meet without raising a loan or selling other investments (if you have any). Have you inherited any cash from your father? Do you have any savings that you don't immediately require? If you can meet the whole of the costs, great. If not, at least you will know how much you need to raise by borrowing or by selling investments.

Step 3: If you do have to borrow, generally the cheapest way to do this is on mortgage. If you already have a mortgage on your own home, and there is plenty of equity in the home, the lender may be happy to advance you a further amount on the existing mortgage. But you do have the option, rather than borrowing on the security of your own home, of mortgaging the house you have just inherited.
 
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A property which the OP inherits — meaning, if that really is the only asset of the estate, the OP need to pay his grandmother's legal bills, because they're a charge on the asset that he has inherited. The point is, she doesn't have to pay them.

But, despite what the OP says in post 8 ("No other assets or accounts. No valuables either.") it's possible that he means that he didn't inherit any other assets, accounts or valuables. It would be slightly surprising if a man who owned his own home had no bank account, no savings or investments, no possessions of value, nothing. Plus, if that was the case, if the OP was to inherit the entire estate, why was he not appointed as executor? He's married with four fine kiddies of his own, so not a callow youth. And he's the person with the greatest interest in getting the estate administered. It seems a bit much for the Da to ask OP's aged grandparents to deal with the administration of the state for OP's sole benefit when there's no obvious reason why OP wouldn't be able do it. So I'm thinking maybe there were other assets in the estate that didn't come to OP but went to other family members, possibly the grandparents.

But, having said all that, these things are the OP's business and he doesn't have to tell us the fine details of his father's testamentary arrangements, or the reasons for them, if he doesn't want to. The bottom line here is that OP's gran shouldn't be personally exposed on this; if the house is the only asset in the estate and it can't be sold, discharging the costs of the administration doesn't become Gran's problem; it becomes OP's problem.
 
isaacryan said:
Christ, it’s all so stressful and complicated
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isaacryan said:
I’m absolutely terrified that this will devastate me financially
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My pennies worth

Take a step back and breath. While there are lots of intricate moving parts the basic issue is: there may be a big bill coming your way that you can't afford to pay as is.

Separate out those issues and deal with them piece by piece:

On the first part (the tax) there is good advice above on steps you and your, grandmother and your late fathers partner might be able to take to minimise these. You should consider them. Perhaps discuss with all the relevant people. You all seem to be working too the same goal. Why not do it together rather than on your own.

On the second part, how do you pay for it?

isaacryan said:
Should I be looking at remortgaging my oen home or taking out a bank loan to pay all these legal fees?
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Both are options. The advantage of a mortgage is it will most likely attract a lower interest rate. There will be a cost on setting it up (yet more solicitors fees) so it really depends on what the final bill to you is and how quickly you can pay it back as to what is the best approach.

This all presupposes your finances are in a good position. Talk to a lender and see what that are willing to lend. Unless you've good reason to wait you can do this now. It can take time to get all the paper work together.

As yet another alternative what about a family loan.

The focus should be 1) minimise the bill and 2) maximise your flexibility in meeting it.

Finally, on the stress of it all. Talk to your family/friends about your concerns. You're not the first to go through this.
 
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In summary:

1. Yes there's inheritance tax, its your responsibility to pay it; but you may be able to mitigate that.

2. If there's any other cash / assets in the estate (even if not left to you), they are used to pay legal costs first.

3. None of this is insurmountable; take a breath, do one thing at a time.
 
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