Be aware that the tax law goes against you if you are not married, writes Laura Slattery.

"Living in sin" they used to call it: a couple buying and living together in a property without saying "I do" first - no gold bands on their fingers, no photographs of extended families posing on church steps and no marriage certificate.

Cohabitation is on the increase, so much so that the phrase "living in sin" is now usually only uttered in jest.

But old-fashioned religious disapproval of non-married couples survives in the tax system. It makes cohabiting a costly option if one partner dies. The State will not recognise the relationship, treating the surviving partner as a stranger to the deceased and charging the maximum possible inheritance tax on any share of property passing to them.

Married couples don't have to worry about capital acquisitions taxes like inheritance tax: they are completely exempt.

But unless they take preventive steps, a surviving cohabitee could end up being forced to sell their home in order to pay a hefty inheritance tax bill, warns Ms Kerri O'Connell, taxation manager at tax advisers Hamill Spence O'Connell.

"There are a lot of people now who are choosing not to get married, it's a lifestyle choice. It's a question of being aware that the tax law goes against you if you are not married," Ms O'Connell says.

She says it is essential that non-married couples seek legal and tax advice before getting mortgage approval and buying property together.

There are no tax implications to breaking up, unless one partner feels like giving their share of the property to the other as a farewell gift.

However, tax bills do arrive as one partner is grieving the death of the other. Assuming the surviving partner inherits the deceased partner's share of the property, he or she will be taxed on 20 per cent of the benefit after the first €22,060 - the lowest threshold under capital acquisitions tax rules (see table).

"Because they are unmarried, they are treated as strangers for tax purposes," says Ms O'Connell. "And the more time goes by, the more they are exposing themselves," she adds.

"The value of the house increases, so there's more taxable benefit. In some ways it is a question of the order people do things in. A lot of people buy a house now and get married later," she says.

However, mortgage protection policies, which lenders require that homeowners take out, will pay off the loan in the event that one mortgage holder dies, leaving cohabitees exposed to inheritance tax on the full amount of their partner's share.

So on a property valued at €300,000, the deceased partner's share will be worth €150,000. Take away the €22,060 that the survivor can inherit tax-free, and that leaves a tax bill of €127,940 - easily enough to force the survivor to sell the house they lived in with their partner in order to pay the tax bill arising from his or her death.

An alternative is for the surviving cohabitee to remortgage in order to avoid this situation. "That might not be a big issue for some people, but it might be significant if the surviving partner has children or a lower salary," says Mr Richard Grogan, a solicitor at O Flynn Exham & Partners.

There are two things cohabitees can do to reduce or remove their tax liability, Ms O'Connell notes.

The first is to take out a separate life insurance policy that will insure against any tax liability that would arise if one partner died.

"We would not normally recommend policies like that as they can be too expensive," she explains. "If you took it out 10 years ago, five years later property prices will have risen and you will discover you should really have been paying higher premiums."

As a result, cohabitees would have to review the policy on a regular basis. "You have to plan for that and you have to pay," she says.

The second way to get around the tax liability is to avail of a relief brought in just three years ago in the Finance Act 2000. This exempts people who have been living in a property for three years from the majority of the capital acquisitions tax payable on the property.

The measure was not designed for cohabiting couples. In fact, it was designed to aid the transfer of family homes shared by siblings or other relatives who might not be able to afford heavy inheritance tax bills.

By happy coincidence, the measure is equally applicable to cohabiting couples.

But there are stringent conditions attached to this relief. The benefactor cannot own any other residential property. And they must live in the property for six years after the death of the person bequeathing them the property or part of it; otherwise, the relief could be clawed back.

"You could sell the property and move, but you would have to invest all of the proceeds in the new property. It would have to be of at least equal value or more," says Ms O'Connell. A human impulse after the death of a loved one might be to sell the house that was shared together and move on. In the case of a surviving partner who has no children, they may want to buy a smaller place just for themselves. It might well cost less than the market value of the shared house. That course would land them back in the inheritance tax loop.

For some young long-term couples, cohabiting can make good economic sense: they don't want to keep pouring money down the rental drain while they are still making their mind up about whether or not the prospect of "til death do us part" appeals.

Others see marriage as an institution and shy away from the religious connotations, lack of freedom and practical co-dependence that word suggests.

Then there are couples who legally cannot tie the knot: same-sex couples or second relationships where one or both partners has, for whatever reason, not obtained a divorce, notes Ms Darina White, a solicitor at A&L Goodbody. "A lot of the time couples are emotionally married but cannot get formally married," she says.

In Britain, the government has promised to improve the position of cohabiting gay couples who want to put their relationships on a legal footing and has indicated it will consider harmonising the tax rules for married and gay couples. This could, in theory, have knock-on effects for heterosexual cohabitees there.

Here, the Law Reform Commission is due to publish a consultation paper on the general rights and duties of cohabitees this summer.

The Society for Trust and Estate Practitioners, meanwhile, last year made a budget submission to the Government arguing that it would be equitable to accord the same tax treatment to couples in a permanent relationship as to married couples on the inheritance of death-in-service benefits and pensions. This was rejected.

The relief brought in under the Finance Act 2000 has helped reduce the frequency of "the classic situation, where people who lived in a house all their lives were suddenly forced out on the street", says Ms White. "Things have moved on, but for all intents and purposes, you are still a stranger in terms of tax."