CGT / inheritance tax on house - unmarried couple

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newbiehelp

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Hi
Unmarried couple purchased a house several years ago. Will is in place that the other half of the couple will inherit the other half of the house.

However, as not married, if one person passes away, the other person will have to pay CGT at 33% on half the value of the house before they can take full ownership.Is this correct?

Both parties have lived in the house for almost 20 years, no other interest in any property currently, one may have a small inheritance by share of a house at some stage in the future.

Is there an exemption from CGT based on its the main home for both parties for so long?

Life cover is in place to clear mortgage when one person passed away.

Would a section 72 or 73 policy be a solution? Although these seem to have quite a large monthly premium?

Is the cheaper and more sensible approach to get married …. Nothing against marriage just never got around to it.

Neither half of the couple wants to end up having to sell house to cover inheritance tax in the event of the other person passing away.

Any advice appreciated…
 
newbiehelp said:
However, as not married, if one person passes away, the other person will have to pay CGT at 33% on half the value of the house before they can take full ownership.Is this correct?
Click to expand...

I am sure it's a typo, but just to be clear.

There is no Capital Gains Tax on the family home. So if he dies, the estate does not have to pay CGT.

She will inherit half the house - say it's worth €200k. She will pay Capital Acquisitions Tax of about 33% or €66k.

Given that the mortgage will be cleared, this should be manageable so that she won't have to sell the house.

If you don't really want to get married, is it worth getting married to avoid €66k? Probably not.

If you don't care either way, then it's worth a Registry Office job.
 
Not sure what happens to a mortgage protection policy.

He dies when the house is worth €400k and there is a mortgage of €100k.
The mortgage is cleared - so does she have a tax liability on her €50k? I presume not.
 
Apologies typo @Brendan Burgess meant CAT not CGT

In your example ….. if half share of house is worth 200k either one would be faced with bill of 66k …. That wouldn’t be manageable by either party ……so I’m assuming the person who inherits would have no option to sell house to pay that bill.

Wouldn’t want to be forced to sell the house if it could be avoided
 
If they have a mortgage now they are making mortgage payments. So are you sure that they would not be able to afford the repayments on €66k?

What age are they?

If she is aged 60 when he dies, she can take out a Lifetime Loan from Spry.

Key Post - Spry Finance Lifetime Loans

I find the Spry Finance website complicated so this is my summary of it. If you are at least 60, you can take out a Lifetime Loan from Spry Finance. There are no other providers in the Irish market which is a pity. You do not have to make any repayments, they will roll up the interest. The...
www.askaboutmoney.com

Brendan
 
@Brendan Burgess both in early 50’s. They are paying mortgage but even if mortgage was paid if one dies, one would struggle to qualify for a loan that size, never mind repayments etc.

As they are getting older there is always a risk of serious illness, inability to work, losing their job - especially if this happened before you could even look at a lifetime loan. What if property was needed for fair deal etc…

I was reading briefly about the dwelling house exemption. Would that kick in or would it have to apply, possibly refused?

I know it sounds cold and unromantic but perhaps the cost of a small registry office wedding might ease that worry of what may happen in the future and the possibility of having to sell the house or take out a huge loan etc especially if getting older or facing illness etc
 
newbiehelp said:
@Brendan Burgess both in early 50’s. They are paying mortgage but even if mortgage was paid if one dies, one would struggle to qualify for a loan that size, never mind repayments etc.
Click to expand...

You should read the Key Post.
If you have a house worth €400k when you are 60...
Spry Finance will give you a mortgage of 15% or €60k
You don't need to make any repayments, they roll up the interest.
 
There may be other financial reasons to get married.

1) If he dies, she will get the Widow's Pension. It is not means tested.
2) It is possible that their own pension funds make provision for a widow's pension
3) Generally speaking, spouses are treated better in the distribution of pension assets.
4) If one of you loses your income, married couples are treated much better in the tax system than two single people.

If either of you does get a terminal illness, then get married immediately.
 
Thanks for all the advice… certainly food for thought

Life is full of uncertainties and the last thing we would want is one of us having to sell our home, try to take our loan, struggle with potential job loss or sickness….and like you say, spouses are generally treated better on tax/sw system

Think we will have to go down that route ….
 
My brother in law got a shock when he realised that with no will his next of kin was his brother.. no other living close family.. and that as his affairs stood at the time (no will) his long term (28 years) live in girlfriend (who was paying the mortgage with him) wouldn’t get anything. Worse still if his brother handed over his share of the house to her the taxman would take a cut.

They got married fairly quickly..
 
Even with a will there apparently would have been tax issues, this was a few years ago in England. Her inheriting his half of the house etc.
Anyway he’d been married a few times before so I don’t think it was a big step…LOL
 
That’s the issue, two people paying mortgage all their lives but if unmarried and one passes away, the other is faced with a huge tax bill… even when will is in place to ensure the surviving partner inherits the other half of the house

Monbretia said:
Absolutely get married, don't even have to tell anyone! Quick civil ceremony and job done.
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by doing some research today seems you have to tell someone as you need to name your witnesses when registering your intent to marry … I’d be happy to grab two witnesses of the street and tell everyone afterwards
 
newbiehelp said:
Would a section 72 or 73 policy be a solution? Although these seem to have quite a large monthly premium?
Click to expand...
The general consensus here on Askaboutmoney seems to be that there are poor value for money and/or not generally appropriate - maybe in rare edge cases? Hand a look for previous discussions about them. E.g.:

Key Post - Is a Section 72 policy good value?

This was raised in another thread . I have never seen an example of how it works in practice. Let's say I am 65 and am worth €1m which I want to leave to one daughter. I am in good health. I take out insurance for the CAT bill. The CAT bill if I were to die today would be about €220k (€1m...
www.askaboutmoney.com
 
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