Cohabitants' agreement and court application for support

Discussion in 'Wills, inheritances and gifts' started by HeatherG, 28 Mar 2018.

  1. HeatherG

    HeatherG Registered User

    I cohabit with a 'qualified cohabitant'. For a number of reasons, although we are committed to one another for life, we don't wish to marry. I am divorced and have two adult children whom I want to look after when I die, as I wish to look after my partner, who I'll call X

    I am a good deal older than my partner, and I own the house and most assets. I gather that if I leave the house and a sum of money (for an income stream) to my partner in my Will, X will be taxed as a stranger on this.

    I also know that X could apply to the courts as a qualified cohabitant for property rights and maintenance, and so far as I'm aware (am I right?) X wouldn't have to pay CAT on anything made over under a court order.

    I would like to write, with X (and the agreement of my children) a cohabitants' agreement (Sn 202 of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010), in which we would agree that X would apply to the courts for a specified amount of money from my estate, along with our home.

    Then, in my Will, I would like to mention that I wish to bequeath everything to my children, other than any amount that the court might make over to X an as order.

    Or something like that. In summary, I want to see my partner and children 'right', but can't do so if my estate is taxed. And so I am wondering whether what I write above is lawful and acceptable?

    Any advice would be very welcome.

    Thank you!
  2. Ravima

    Ravima Frequent Poster

    You appear to have significant assets. The spending of a hundred or so to a solicitor might be a fantastic investment!
    NicolaM likes this.
  3. HeatherG

    HeatherG Registered User

    Thanks, Ravima. Yeah..I'm not all that sure what having significant assets means. I DO have a reasonable sum, invested as a portfolio of shares, managed for me, from which I draw a modest enough income, and I own a second (small) house, rented out for a small rent. And one or two other things. But to be honest my income and outgoings are hard enough to balance, and apart from investments I don't have that much in my accounts. And I DID engage a recommended solicitor, and X and I had a meeting with him for an hour and a half. But he just didn't seem to KNOW that much, and even him reading and replying to an email runs up charges, so that after one meeting and a few emails (and a good deal of research on my part), I already owe him €750+VAT and, frankly, nothing to show for it yet. So that getting to the point where (a) a definite course of action has been decided on, and (b) various things like Trusts or agreements, plus Wills, have been drawn up, seems to me like it's going to cost the earth.

    I've actually consulted a good few solicitors over one thing or another in the past years - Company Law, Family Law, all this cohabitation stuf... - and it seems to me that a bit of research and reading the actual Acts seems to get a person nearly to more than the solicitor knows.

    Maybe I just need to find the right solicitor. But finding someone who can talk definitively about Inheritance Law, Wills, Trusts, cohabitation, tax/tax reduction, and social welfare (X has some social welfare things) just seems to be impossible. Or incredibly expensive. I live in Connemara, fairly distant from a large number of solicitors, and it seems a long way from any really knowledgeable ones (no offense intended).

    Thanks again

  4. Joe_90

    Joe_90 Frequent Poster

    I think that it would be very unwise to write a will stating that the children get everything the your partner does not get.

    First of all let’s deal with the house. If they don’t own another house then the house should qualify for the “Dwelling House Exemption” and therefore be exempt from CAT.

    As a rule trusts are not used in Ireland as they are tax inefficient for people over the age of 21.

    So if the house passes without CAT how much is left for your partner.

    I don’t think that a S202 award would fall outside CAT. It’s a claim on the estate and would be subject to CAT.
  5. HeatherG

    HeatherG Registered User

    Joe_90, that's a really helpful response. I am in no way a lawyer, and I'm simply trying to feel and read my way into this whole thing.

    I wonder whether I might pose you some further questions on your responses?

    First, though, if I gave the impression that the children would simply "get everything the your partner does not get", then that was shorthand. I envisaged (and this may be really stupid!) something like (simplified): "I leave all my assets of all kinds my children, without prejudice to any award made by a court following an application made by my partner X, under S173 of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010)." I was thinking of this because I want it to be as clear as possible to all concerned that, although X would have to apply to the courts, within six months of my death, I recognise X's right to do so.

    Second, each of my children (in their 40s) owns a house of their own, and wouldn't qualify for dwelling house exemption. I should add that in my divorce there is an order preventing my ex-spouse from making any further claim on my estate; and in any case we all want the same thing(s) in the end.

    Third - and here is where I would particularly welcome comment - it's my strong impression that I read somewhere authoritative (can't turn it up just now, but think I can - it might even be Revenue) that a property or maintenance order made by the court on my estate, on behalf of X, would be exempt from CAT. In other words, if my qualified cohabitant X applies under S173 for property and maintenance, then X could be granted our home (shared in every way for many years), plus sufficient capital from my estate to provide X an income stream adequate to allow X to live fully in that home, and free of CAT. Indeed, I had believed that was the whole point of S173 of the Act.

    Fourth, the cohabitants' agreement I had in mind would include something like "we hereby agree that in the event that X should survive me, then X will make an application to the court for property and maintenance rights from my estate, as allowed by S173".

    Fifth, my Will and the cohabitants' agreement would both state that on X's death any remnant of my estate shall pass to my children".

    Finally, based on a quite demanding budgeting exercise, it seems clear that if X receives our home in a property order, PLUS sufficient capital added to what X has already to allow X to live on its income stream, there would be sufficient left over to pass directly to my children. I should add that I had in mind that a small ARF that I have would pass to my grandchildren, since even with the small Category B CAT thresholds, they would pay very little CAT, whereas if left to my children there would be Income Tax payable at the marginal rate.

    BUT...this is all the workings-out of a fevered, unschooled, non-legal or financial mind. It's quite possibly daft.

    I fully accept that trusts seem inefficient/not useful for children over 21, and although I mentioned them, it was because the notion of a trust had been raised by a solicitor. But I can't see anything useful in a trust. I simply being daft? You see, IF X can go to court for an order and have that order CAT-free, then why not? BUT I suspect that X would be very reluctant to go to court unless it was 100% clear that that was my and my children's actual desire.

    Thank you again.
  6. Michael Heary

    Michael Heary Registered User

    I'm in a comparable situation myself though we are both men and there are no children involved. I'm the older partner and I've come round to thinking we will need to get married at some stage, it seems like the easiest solution. Then a simple will to leave my assets to my partner and my siblings. Maybe you have reasons not to get married but I think in my case the option is definitely there.
    DeeKie likes this.
  7. HeatherG

    HeatherG Registered User

    It's good that now it doesn't matter whether you're same or opposite sex. Yes, I agree: marrying sorts most things out (though if a person has adult children - I know you don't, Michael, but I do - then it's either a matter of taking it on trust that your partner will in turn leave the balance of any remaining assets to the children, or finding some other mechanism to ensure that. I would probably just leave it to trust, since I trust all concerned). I DO have reasons not to marry. One is that I just don't believe in the concept of marriage anymore: don't see why it should be needed to keep two people who love one another together (and slightly fear that being married 'changes' the relationship in some way); and I also feel that, having been married before, I made a vow that was life-long. I can probably manage to overcome my scruples in that regard. The other is financial (tricky to explain here, and somewhat trickier to overcome).

    In short, in your case, I agree: marry your partner, and make a simple will. That would be the easiest and the best (and cheapest to do!). If you don't care about whom your partner leaves any remaining assets to, then so much the better. And again, if you trust him to do what's right and best, then that's OK.

    I'm fast concluding that I need to turn my mind to marrying, dammit...
  8. huskerdu

    huskerdu Frequent Poster

    It seems very risky to leave it to your bereaved partner to go to court and trust that the court will give them a fair settlement.
  9. Michael Heary

    Michael Heary Registered User

    If your main concern in inheritance tax then there is an insurance designed specially for this.

    I've not looked into it in depth but might be a consideration

    I can't post links but google inheritance tax insurance Ireland
  10. HeatherG

    HeatherG Registered User

    Do you think so, huskerdu? I had kind of thought that, if a cohabitants' agreement made it clear that I WISHED X to apply for a property and maintenance order, and if my children supported X's claim (which I know they would), then the court would do the decent thing by X. Especially if - as is the case - we have cohabited for many years, and are clearly committed to one another and share in all aspects of our lives and living and taking care of our home, etc.

    But...I have no knowledge or experience of how the courts look on an application for a property/maintenance order by a qualified cohabitant. If people think that it's a dodgy/risky thing to do in respect of my partner, then I wouldn't go that route.
  11. huskerdu

    huskerdu Frequent Poster

    Im not a laywer and I dont know the answer to the following questions, and its clear that you dont either

    What legal precedents would be relevant in such cases ?
    How much would a court be likely to award ?
    How long will it take ? (What do you expect your partner to live on, when your estate is frozen pending the legal action)
    What will the legal fees be ? ( How do you know it won't be as much as the tax you are trying to save ?)

    The courts can't to the decent thing, if it doesnt follow the law.

    From a human level, there are far to many unknowns

    Are you absolutely sure that one of your children wont object to the application for support?
    What if your partner has developed dementia, how can they take legal action then?
    You are planning that your will to say that you are leaving nothing to your partner unless they take legal action. You have already said you think they will be reluctant. Maybe they wont be able to face it.

    I know you think you are doing the right thing, but for all the reasons above, I think its very very risky and quite unfair on your partner to put them through a legal case.
  12. HeatherG

    HeatherG Registered User

    I take your points fully, huskerdu. Yet I also think you are wrong in implying that I'm aiming to do anything that would be unfair on my partner.

    In reality, better by far to rail against the unfairness of the civil/tax law in Ireland, with its bias against those long term cohabitants who are unmarried. There are sound reasons in people's minds NOT to marry. First, a couple may feel that marriage will alter significantly the nature of the relationship, one that is based on remaining together into the future simply out of love, and not because of some external covenant made before the state or before God. Second, a partner who had previously been married may feel (as I do) that the vows I made were made seriously, and for that reason not wish to marry again. And there can be other reasons also, some practical, some moral.

    The law as it stands appears to force cohabitants into marriage, if a partner wishes to provide for his/her other half without losing 50% or more to the tax man. Cohabitants, whether 'qualified' or not, remain blood strangers, hence 'enjoying' a mere €16,250 of inherited assets not liable to CAT/inheritance tax.

    That must affect many thousands - tens of thousands - of long term, committed cohabitants who for one reason or another, don't wish to marry.

    To address your specifics:
    - I don't know what legal precedents there are. I suppose there must be some but I am not a lawyer.
    - The Act implies - more than implies - that a cohabitants' agreement, meeting certain conditions, can make provision to see that the surviving partner is looked after vis-a-vis both property and maintenance. I know what that translates into, in capital terms, in order to provide an income stream that would allow my partner to live fully. My partner (and my children) agree with the 'budget' that's based upon. Frankly, I don't see why my partner shouldn't be awarded that in the court.
    - The court would be following the law by making such an order. The law is clear enough there. Though...I agree that one can never second-guess what decision a court will make.-
    - The tax I am seeking to save (as a necessity in order to allow me to provide for my partner while also leaving sufficient to my children) is substantial. Even acknowledging the fantastical fees that a solicitor may charge, the fees would have to be enormous to amount to more than the tax that would be due.
    - In reality, I am not clear that my partner would need legal representation, if the right preparation has been done. After all, when I divorced, my ex-spouse and I did it with no solicitors involved, at a total cost of some €60 (for Commissioner of Oaths fees). My experience when represented in court by a solicitor is that I would have been better off to have represented myself; the outcome would have been infinitely better, and it would have been free!
    - Yes: I am certain that my children will not object, and indeed that they would/will support, and be seen to support in court, my partner.
    - I certainly do NOT want to force my partner to go to court. Yet, if it were the only way, then I say to you that that is the fault of the law of the land's fault, not mine.

    In the event, we probably WILL marry: reluctantly and with heavy hearts. Not because we don't love one another, but because we do. And because I always took my marriage vows from my previous marriage very seriously.

    To be frank, I think I feel the energy for a campaign coming on. The law as it stands for unmarried cohabitants - cohabitants who easily meet the criteria for being 'qualified cohabitants' - is unfair and unbalanced. It makes for a difficult outcome at best. It can force a person to go against their deepest principles. It actually undermines the 'sanctity of marriage', something the law purports to protect (as it must, within our Constitution); it says that a marriage vow, taken for life, can be thrown aside. And finally it seems to ensure that the hapless unmarried 'qualified cohabitant' must go and line the pockets of solicitors, in order to gain what is at best a less than optimum outcome.

    Unless you have some obvious alternative route, huskerdu. If you have, I would love to hear it. Numerous people tell me - and my researches seems to confirm it - that trusts are complex and inefficient.

    Do tell! I'm not the only person on this forum who would love to hear the alternative!