Drafting Wills for cohabitees who have no children poses a range of challenges and issues to be considered. However, the first point that must be considered is that the wishes of each individual must be honoured. Each person should have a clear idea in their own mind as to what they wish to do with their assets. It is difficult to make progress on a Will in this circumstance where parties have yet to make up their minds or are unsure about the way forward.
Ideally it would be best if the cohabitees have discussed the matter between them, and that they have a general understanding or wish with respect to an approach. The options are that the cohabitees can take a joint approach.
They can take an approach where they are both in agreement of their individual wishes and that they dovetail, or they can take an approach where there is wide divergence between their individual wishes.
Generally cohabitees will wish to leave property between them, but that is difficult from a tax perspective as cohabitees will be treated as strangers in blood and therefore will only be in a position to leave €16,250 to each other tax free. A significant amount of tax will be paid if an entire Estate is left from one cohabitee to the other. This may not be a particular problem as there may be sufficient liquid assets (cash, shares, life policies etc.) to meet the tax liability. It is more problematic when there is real property involved (houses, apartments) as it may be the case that some of these would have to be sold for the purposes of paying a tax liability. However, it is not unusual for cohabitees to have this desire between them and to wish to
structure their Will in this way.
It may be the case that one cohabitee could qualify for what is known as dwelling house relief. This is a relief whereby if the beneficiary under an Estate has no other house, they can take the house that they are living in tax-free from the other partner, as long as they have been living in the house for in excess of three years. This relief may well benefit a surviving cohabitee, but there are a range of other rules that apply in respect of the relief and specific advice must be obtained at the time of Will drafting.
It is not unusual for cohabitees to bring their own individual assets to the relationship. On the death of one, a cohabitee may wish that those assets that are brought to the relationship should pass back to that cohabitee’s family, rather than passing to their surviving partner and that is not unusual and there could be good tax reasons for doing this. So, for example, a cohabitee can leave up to €325,000 tax-free to their parent, and if both parents are alive there is a tax-free threshold available of €650,000 and there well may be a significant tax saving by one cohabitee leaving family assets back to their parents in the first instance, and then to maybe to some brothers and sisters in a way to achieve a bequest that is tax efficient.
For more general information, please check out our Frequently Asked Questions (FAQ). This will give you some further information which applies to all wills including this case.