A young couple approached me at a recent seminar with a few questions about their mortgage and also about the new Civil Partnership Bill that they’ve been reading about.
“Will we automatically be included in the co-habitation legislation?” they asked. “Is there an opt-out clause?”
This is important to them because they do not intend to get married. She was already married once, unhappily. He has never been married, but supports an eight-year-old son from a previous relationship.
So first to the mortgage, the simpler of their two dilemmas.
Their apartment is in serious negative equity so there is no opportunity for them to switch from their lender, Permanent TSB, to a cheaper provider.
The PTSB variable rate is now 4.1 per cent APR, but it could rise by another two 0.5 per cent increases before the end of the year; this will add at least another €100 a month onto their loan.
Unfortunately for this couple, the bank is now limiting its fixed rates to those mortgage holders who have loan–to-value of at least 50 per cent (meaning that their mortgage represents no more than half the market value of the property), so that rules them out of a fixed rate.
Like so many others in the same position, they’re going to have to factor in future, higher interest rates.
They may want to speak to their bank manager at some point about extending the term of their loan or moving to interest only payments if they end up struggling to repay their mortgage and any other variable rate loans that are also becoming more expensive (PTSB has also increased personal loan rates by a whopping two per cent).
This means they need to do a careful review of their finances, cut back on discretionary spending and ideally, find some way to earn more income. The certainly don’t want to end up losing their jobs.
As for their marital situation, the Civil Partnership Bill started out as a way for same-sex couples to end up with greater legal protection in regards to their separate and joint property, taxation, pension rights, inheritance and even to declare each other as ‘next of kin’.
Since then the Bill is now to address the position of co-habiting couples, same-sex or heterosexual.
A ‘safety net’ redress scheme is to be introduced that will apply to all couples that have lived together for three years or two years if they also have children, and aims to protect a financially vulnerable partner in the event of a break-up of the relationship or the death of the other partner.
It allows for the (still undisclosed) payment of divorce-style maintenance payments or a share of the estate.
Objections to the state assigning such rights to people who have opted out of either the legal marriage or civil partnership option are gathering and has resulted in a suggestion that the three year co-habitation period be extended to five years, not that the whole redress idea be dropped.
This young childless couple are already joint owners of their house. But they currently have no legal right (or desire) to claim maintenance from the other if they break up, nor to a share in their remaining estate if one of them were to die. That will change with this bill.
So far there is no specific opt out or opt in clause to allow co-habiting couples not to participate in the new scheme, but these two should consult their solicitors about their positions, especially since the male partner already has a legal and financial/ inheritance obligation to his son.
Under the Bill, his financial resources could also be claimed by his partner – to whom he is neither legally married nor in a legal civil partnership – if they broke up and she had become financially dependent.
Meanwhile, I couldn’t help asking if they had made any provision for each other if the other person did die, or if they broke up?
“Well, we have mortgage protection and serious illness insurance that clears our half of the mortgage if either of us got really ill or died,” they told me. His workplace death in service benefit however is assigned to his son.
I (gently) suggested that if they really love each other, they might each want to take out a life assurance policy in each other’s name to at least clear the balance of the mortgage and to provide some extra financial benefit if one of them died.
Such term insurance cover is still not expensive for non-smokers and they can contact a broker or shop around themselves for a competitive quote.
I also recommended that that write formal wills – which they had not done – in which they could formalise what part of their estates, if any, they wanted to leave to the other person, keeping in mind that the male partner’s child has inheritance rights.
This new Bill is on its way. To many couples who prefer – for whatever reason – not to completely ‘formalise’ their relationship, the automatic co-habitation rights seem both intrusive and unnecessary.
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