Co‑Habiting Couples & The Hidden Financial Risks.
There’s no doubt the traditional Irish family has evolved. More couples today are choosing to build lives together—buying homes, raising children, and sharing finances—without getting married or entering a civil partnership. Socially, this shift is widely accepted. But from the Irish Revenue’s perspective? Not so much.
One of the most common (and costly) surprises we see is how co‑habiting couples are treated by Revenue. Despite living as partners, the Irish tax system doesn’t recognise this relationship in the same way it does marriage. In fact, for inheritance purposes, you’re effectively treated as strangers.
And that can have serious consequences.
The €20,000 Problem
When a married couple transfers assets on death, there’s no Capital Acquisitions Tax (CAT) to worry about. It’s fully exempt.
For co‑habiting couples however, it’s a completely different story.
The surviving partner falls into what’s known as Group C—with a tax‑free threshold of just €20,000. Anything above that is taxed at 33%.
Let’s put that into a real-life scenario:
- A couple owns a home worth €400,000,
- Each owns 50% share,
- One partner passes away and leaves their share (€200,000) to the other
Here’s the reality:
- First €20,000 → tax free,
- Remaining €180,000 → taxed at 33%,
- Capital Acquisitions Tax Bill: €59,400
In many cases, that kind of liability forces the surviving partner into an impossible position—sometimes even having to sell the family home.
Insurance Isn’t Always the Safety Net People Expect
A lot of couples take comfort in having mortgage protection or life cover in place. But unless it’s structured correctly, it may not solve the problem—and can sometimes make it worse.
For example, if a joint life policy is paid from a joint account, Revenue may assess that each partner funded 50% of it. That means when one partner dies, the survivor could be taxed on half of the payout.
At a time when that money is meant to provide stability, losing a chunk of it to tax is the last thing anyone expects.
So What Can Be Done?
The good news is this is very much a planning issue, not an unsolvable problem. With the right approach, these risks can often be reduced—or avoided entirely.
Here are three key strategies we regularly recommend:
1. “Life of Another” PoliciesInstead of a joint policy, each partner owns a policy on the other person’s life. Because the surviving partner owns the policy that pays out, the proceeds typically fall outside CAT. The result? The full benefit goes where it’s needed.
2. The Dwelling House ExemptionThere is a potential route to inherit a home tax-free—but the conditions are tight:
- You must have lived in the property as your main residence for at least 3 years prior,
- You cannot own an interest in any other property at the time of Inheritance,
- You must remain living there for 6 years after the inheritance
When it applies, it can be incredibly valuable—but it needs to be carefully managed.
3. Section 72 Life Assurance PoliciesWhere a CAT tax bill is unavoidable, a Section 72 policy – A Revenue approved life assurance policy specifically designed to pay Inheritance Tax – can be used to fund it. This type of policy is specifically designed to cover inheritance tax liabilities, and importantly, the payout itself isn’t taxed—provided it’s used to settle the CAT due.
Final Thought
In our initial meetings with co‑habiting couples, they mostly assume that they are financially protected simply because they share a life together, but legally and tax-wise, that assumption can be very risky.
Like most things in financial planning, it’s not about reacting after the fact—it’s about putting the right structures in place early, so that if the worst happens, the financial impact doesn’t make an already difficult situation even harder.
If you are a co-habitant and unlikely to get married / civil partnership, then some targeted financial planning in this area may prove very helpful to you in the long term. Book a Discovery Call with the Eolas MoneyAdvisory Team to chat through your circumstances!
