Consider this common (and very unfortunate) scenario:

– A couple are living together in an apartment owned solely by one partner. 

– They are not married or in a civil partnership. 

– The owner dies intestate (no will). 

– The deceased’s parents are still alive. 

– The surviving partner has lived in the apartment for years, meets all the usual dwelling house exemption conditions and wants to stay there.

Under the Succession Act rules on intestacy, because there is no spouse/civil partner and no children, the parents inherit the apartment, not the surviving cohabitant.

From a Capital Acquisitions Tax (CAT) perspective, that’s where the damage is done.

Why the dwelling house exemption is lost

The dwelling house exemption can apply to both gifts and inheritances, but the conditions differ:

– For an inheritance, the key test is that the dwelling was the beneficiary’s main residence and the beneficiary meets the other conditions (no other residence, 3‑year occupation before, 6‑year occupation after, etc.).

– For a gift, the dwelling must be the disponer’s main residence at the date of the gift (or they must be unable to live there due to mental/physical infirmity), and the beneficiary must satisfy the occupation and “no other dwelling” tests.

In this case:

1. The surviving partner does not inherit the apartment from their deceased partner – they have no legal entitlement on intestacy. The inheritance goes to the parents.

2. The parents then propose to gift the apartment to the surviving partner.

At that point:

– The disponers for CAT purposes are the parents, not the deceased partner. 

– The parents do not live in the apartment as their main residence. 

– Therefore, the conditions for the dwelling house exemption on a gift are not satisfied.

Result: the surviving partner receives a taxable gift from their late partner’s parents, typically falling into Group C (€20,000 threshold), rather than a tax‑free inheritance under the dwelling house exemption.

There will probably be a CAT liability on the property, with no cash to pay the tax.

 Key planning takeaway

If a couple is cohabiting and one partner owns the home, relying on intestacy is a serious tax (and practical) risk:

– Without a will leaving the property (or at least a life interest) to the surviving partner, the surviving partner:

  – does not inherit under intestacy

  – loses the opportunity to claim the dwelling house exemption on that inheritance, and 

  – may end up with a taxable gift from the deceased’s family instead.

Advisers should strongly encourage cohabiting clients:

– to make wills that reflect their intentions for the family home, and 

– to consider succession and CAT together – especially the differing rules for gifts and inheritances under the dwelling house exemption.

A simple will could be the difference between a tax‑free home for the survivor and a large, immediate CAT liability.