Ireland recognised same-sex marriage in the 2015 referendum; however, it is yet to give the same nod to common-law or cohabiting partnerships.
And it’s impacting on their finances.
At least that’s how Cleona Kinahan, managing director of O’Leary Financial Planning, sees it.
“It’s hard to see any financial benefit for a couple that remain unmarried versus those married,” she tells The Irish Times. “From tax-free inheritance to sharing of capital gains tax losses, benefiting from your spouse’s tax credits – it really is a win-win when it comes to the tax treatment of those married.”
Then there’s the issue of pensions. “The widower or widow’s pension is another example of how married couples can benefit from ‘tying the knot’ versus those that never got around to it,” Kinahan adds.
But what about those who don’t “get around to it” because we don’t want to get married? How much are we missing out on?
What about those romantics among us who need tax advantages to nudge them into proposing to the loves of their lives? How can they take full advantage of their big day?
Let’s break it down, starting with the two inevitables of life: death and taxes.
Inheritance
Losing a partner is devastating but unmarried couples face extra hardships attending to money affairs after a death.
“Unfortunately, it doesn’t sound the most romantic reason in the world to get down on bended knee, but the consequences of death on cohabiting couples can be catastrophic,” says Kinahan. “If one individual from a cohabiting couple dies without a will in place, no matter how long they were together, your partner has no automatic right to your assets.”
However, the surviving partner of a married couple has an automatic right to a share of the estate, even if there is no will. If there is a will, the married surviving spouse maintains a right to at least a share of the remaining estate regardless of what the will says. They are still entitled to these assets even if they were written out of a will as long as they remained married at the time of death.
The entitlement is one-third of the assets in the event that the deceased spouse has children or grandchildren, or a half share if there are no children or grandchildren left behind.
The bad news for cohabiting couples is that even if they have their affairs in order and a will in place, they will still inherit less at the end of the day thanks to tax laws.
“Even if they were to inherit their partner’s assets, think of the inheritance tax threshold that would apply to them,” said Kinahan.
“They are considered strangers by the law. A tax liability of 33 per cent would apply on everything over €16,250.”
While there is “some respite with the dwelling house exemption, whereby the family home, subject to certain conditions, may not be liable to inheritance tax”, an unmarried spouse is subject to 33 per cent capital acquisitions tax on anything left to them.
If they were to inherit their partner’s nest egg or rainy day savings to cover the bills, they would have to pay the same tax rate as if they were the milkman despite living together for 20 years.
Children of a common-law relationship, however, have the same rights to inheritance as children of married couples. They can claim a tax exemption on assets inherited from their parents under the threshold of €335,000.
For married couples, inheritance tax is simple, according to Kinahan. “Once you walk up the aisle, you are entitled to inherit your spouse’s assets without inheritance tax.”
When it comes to pensions, the benefits of marriage are black-and-white. Rights to contributory pensions, widow/widower pensions and surviving civil partnership pensions rest solely with couples who signed a marriage certificate regardless of how committed or how long a cohabiting partnership was.
Again, a devastating blow for a grieving family left without their main breadwinner and now in desperate need of a cash injection. “Cohabiting partners cannot benefit from a ‘spouse’s pension’ that may be available through a workplace retirement plan; this can be a significant benefit to any family,” says Kinahan.
Taxes
Cohabiting couples once again get the short end of the stick, thanks to the taxman failing to recognise them in the same way as married couples.
“Cohabiting couples cannot share the standard rate cut-off bands; this can be a great financial benefit if there is a stay-at-home parent, in situations where parental leave is being taken or just one out of the couple earning a smaller income,” explains Kinahan.
Newlyweds still unwrapping gifted toasters and salad bowls also receive a lovely little present from Revenue in the form of reduced taxes depending on their circumstances.
Married couples can trade tax bands and share credits, meaning a spouse earning significantly more can lower their tax liabilities. Those with a wedding ring can still complete two single assessments if they wish with little to no impact on each other’s affairs.
In their first year of marriage a couple may be assessed as single applicants but if they pay more tax this way than with a joint assessment, they can claim the difference back. Stay-at-home parents might be the big winners here thanks to the Home Carer Tax Credit.
Debt
In Ireland, spouses are not responsible for each other’s debts. This may be one of the few areas non-married and married couples are treated alike.
Separation
Married couples can apply to the courts for maintenance from their spouse. Cohabiting couples cannot apply for maintenance for themselves although they can apply to a redress scheme. They must have been living together for more than five years, or two if they have a child together, to be eligible.
If a couple is married, their family home is legally protected from one spouse selling, mortgaging, leasing or transferring ownership of it without the other’s consent.
Cohabiting couples lack the same protection, and if one partner owns the property entirely, they don’t require the written consent of the other (no matter how long they have lived there or invested in renovations) to sell or lease it.
If you are thinking of making things official, even just for personal finance reasons, there are some things to consider first to make sure the marriage lasts, says Kinahan.
“Financial stress can be a big factor in relationships, particularly after the wedding when the reality of shared finances kicks in,” she said.
For this reason, Kinahan suggests couples maintain a joint house/family expense account and a personal bank account for each spouse.
“This helps with budgeting and maintaining some level of financial independence,” she says.
She advises blushing brides in heterosexual marriages to go into the relationship with your eyes wide open from the start.
“I would urge both parties to pay attention to areas like pensions, but women in particular rely too heavily on their husbands to think about income in retirement. This can be a real issue down the line if the relationship doesn’t last the distance.”
For stay-at-home spouses, Kinahan suggests receiving a small wage from the family expense account. “This is money just for you to spend on whatever you fancy; this small exercise can make all the difference for self-esteem and financial independence.”
Lastly, for any couple joining their lives and bank accounts in Holy Matrimony it’s important to lay financials out on the table before you go arranging wedding place cards on it by getting a credit register check.
“I know, it’s not romantic and probably not a deal-breaker, but what if one of the partners had a really bad credit history from non-payment of say a credit card debt before they went travelling, which now may affect their ability to get a mortgage? Would you want to know?” asked Kinahan.
It’s best to sort things out before they become a problem down the line.
