Inheriting Property or Transferring Ownership - Tax Info please?

I

irishmiss

Guest
Hi
Could someone help please? My partner will inherit his parents modest cottage, but was wondering about transferring ownership while his parents are alive. From what I've read so far, I think he's exempt from CAT, property worth 150,000, but would there be other costs? Stamp duty, fees etc. He already has a mortgage on his own property, primary residence for last 3 years, and he's self employed. If his parent's house is in his name, will it count as means? If he lets his parents stay there ( as is his intention) does he have to charge rent? Or can they just reside there for as long as they need?
All info appreciated, it makes my head fuzzy trying to think of it.
Thanks
irishmiss
 
Irishmiss,

For CAT purposes your partner will be class A individual in the above situation. Basically this means your partner can inherit circa €550,000 tax free from his parents. This figure is indexed linked so in theory it should go up every year. There is a provision whereby an individual who has been living full time in a house for three or more years can avail of a CAT exemption. However there is a serious of conditions which must be met in order for the individual to avail of the dwelling house exemption. As your partner owns another property it is unlikely he will be able to avail of the relief.

Once your partner is not inheriting more than €500,000 there is no real benefit in him inheriting the property now.

If he does inherit the house now it can be structured in such a manner that your partners parents have a right to residence in the property until they pass away.

Hope the above helps.
 
WaterSprite said:
Aren't there CGT implications for the parents if they transfer over the property now?
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Shouldn't be if its their principal place of residence.

Will be stamp duty implications for the son though (albeit given value - fairly low)
 
Hello Irishmiss,

You have outlined a number of questions in your query and I will deal with each of them in turn.

1.There are 3 categories of tax that need to be considered:

Capital Gains Tax

Capital Gains Tax applies to the disposal (including by way of gift) of an asset by the owner. Assuming your parents in-law have lived in the property as their private residence throughout the period they have owned it then they will not be liable to any Capital Gains Tax as they will be entitled to claim Principal Private Residence Relief in accordance with the provisions of Section 604 of the Taxes Consolidation Act 1997.

Capital Acquisitions Tax (CAT)

Where an individual acquires an asset by way of gift or inheritance then Capital Acquisitions Tax needs to be considered. The relationship between the parties (the gifter or, in the case of an inheritance, the testator) will determine the amount that can be received tax free. As is outlined above, your husband will qualify for the Group A threshold referred to above, and assuming he has not received previous taxable benefits (a benefit is taxable where it's value exceeds the small gift exemption) from his parents, he should not have to pay CAT on the gift of the property to him.

If he grants a right of residence to his parents then this is taken into account in valuing what he receives, i.e. it assists in reducing the value he is receiving.

There is a mention of an exemption for dwellings above. For more information on the conditions to be satisfied to qualify just pop me a pm.

Stamp Duty

Stamp Duty is payable on the acquisition (including by way of gift) of property where a conveyance of the property is taken. Conveyance is the term given to the document transferring legal title from one person to the other.

If your husband receives the property as a gift he will have to pay Stamp Duty. He will be able to claim a special tax relief called consanguinity relief so that the duty payable is reduced to half the amount he would pay if he was a stranger to the person gifting. For information of Stamp Duty rates you should click http://www.revenue.ie/revguide/stampduty.htm#rates.

Stamp Duty & Inheritances

Generally speaking a transfer (assent) of property to the persons who are entitled under the will or on intestacy to the property does not attract stamp duty.

Capital Gains Tax and Death

Capital Gains Tax does not apply to a disposal on a death. Therefore the issues outlined above would not be of any concern. For this to apply the parents must be compotent to dispose of the assets at the date of death, i.e. to effectively have been of sound mind and be over 18 on the date of death.

If you have any questions just visit my profile and send me an email.

Regards,

Mark
 
I may be wrong but as I understand it, there would be an advantage to the parents signing over the house now in the event that they may need nursing home care at some stage in the future. In my own case, from memory, my mother didn't qualify for any nursing home subvention as she was the owner of her house, however if she had not been a property owner she would have qualified.
 
Hi Irishmiss

That's more a social welfare issue/health department issue and hence would not be affected by the taxation issues discussed above. However, I do believe that owning the property may affect the nursing home subvention.

However, there is this proposal to defer nursing home costs until the death of the resident when on a sale of the property a portion of the sale can go toward the nursing home costs that have accumulated.

I know there was some talk in the media about this proposal being shelved in light of current economic circumstances but I haven't heard whether it was shelved so should be looked into.

There are a number of issues, not just tax, that would be at play in this query and really they are best teased out with an advisor in a face to face meeting so I suggest you engage a tax consultant who can assist you.

miselemeas said:
I may be wrong but as I understand it, there would be an advantage to the parents signing over the house now in the event that they may need nursing home care at some stage in the future. In my own case, from memory, my mother didn't qualify for any nursing home subvention as she was the owner of her house, however if she had not been a property owner she would have qualified.
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Thank you to all of you for your replies. Sorry for my delay, but wasn't online over the weekend.

The only concern of my partner is, he is the only son with three sisters, and he is the youngest, and he is worried that one sister might decide to contest the will later on, even though his parents have always said he will get the house. His sisters are all older with children and each have their own homes.
Nursing home would hopefully not be an issue, as his parents would be looked after by us. I have already done this with my own parents, before they passed, so know what it involves.

irishmiss
 
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