# Gift of a house to a 5 yo minor, legal implications, there is a half paid mortgage.



## Katachka (19 Sep 2010)

I am a sole owner of a house and considering to make a gift of that property to my 5 year old daughter. Is there any legal implications in relation to this considering that the house has a mortgage on in ( half way paid ). How common is this? Do I need to provide the guarantee on the mortgage repayment and if so what is the process? Can anyone put his/her minor child on a deed as an owner considering the age? 

Thanks in advance


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## Mr. C.J.H. (19 Sep 2010)

If the property was mortgage free, it would be possible to do this but there would be stamp duty and possible gift tax implications. But there is absolutely no way that a bank would agree to this with a mortgage on the property. So it's a non-runner unless you can pay the full mortgage first. 

It's neither here nor there but I suspect that you are considering such an unusual transaction to keep the property from either creditors or possibly some    form of family law dispute, either way, in certain circumstances a Court could set aside a transfer designed to avoid other legal obligations.


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## Katachka (19 Sep 2010)

Thanks C.J.H

What about, if we would register a child as a co-owner of the property? That way I am still good with the bank and the guarantor of the mortgage, but the child owns half of the house..


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## Katachka (19 Sep 2010)

Taxwise, because child is technically first time buyer there wouldn't be a stamp duty, and i am sure she would be exempt from the gift tax as she has lived in the house for the last 5 years ( prime residence ). Am I right? Is this a possibility from the legal point of view as well as taxwise?


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## mathepac (19 Sep 2010)

Katachka said:


> I am a sole owner of a house and considering to make a gift of that property to my 5 year old daughter ... the house has a mortgage on in ( half way paid ). ...


As explained above there's  a number of considerations you need to take into account, but by far the largest of these is that you are not the sole exclusive owner of the property concerned. Your bank which has a financial stake in the property and which presumably holds the title deeds would have a major say in any attempt you might wish to make to dispose of it or divest yourself of your "share".


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## Katachka (19 Sep 2010)

well, we went to the bank and they didnt have any problem with putting my partner as a 50 % owner of the property as they were getting a second guarantor on the mortgage repayments as opposed to one they have at the moment.. the thing is that she would lose her first-time buyer relief if we do so, therefore we were thinking to put our daughter as a second owner and her mother would give a personal guarantees on the repayments together with me, what do you think? 
The reason behind this is that we cannot get married and my partner is paying the mortgage together with me, so she is entitled to the half of the property which is almost repaid at this stage.


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## Mr. C.J.H. (19 Sep 2010)

Not really a first time buyer seen as how she doesn't have the legal capacity to 
enter such an arrangement, but you may be able to convince the Revenue Commissioners to allow the relief. If not, consanguinity relief would apply to reduce stamp duty by 50%. 

Re gift tax, I'm afraid it's not as simple as your daughter having occupied the house for the requisite period as: Gifts taken on or after 20 February 2007: Any period during which a donee occupies a house that was during that period the disponer's only or main residence will be disregarded as a period of occupation in that house unless the disponer is compelled, by reason of old age or infirmity, to depend on the services of the donee for that period. Old age refers to a person aged 65 or over;. 

Anyway there is a big difference between the bank agreeing to allowing another adult's name go on the mortgage and deeds of the property and that of a child. The bank will not agree to it without the mortgage being paid off. If you don't believe me, simply ask them!

Also, if you are intending this unusual transfer of the property to defeat some claim or potential claim against you, then as I've said the Court has certain powers to set aside such transactions if they are designed to defeat a lawful claim.


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## fizzelina (20 Sep 2010)

Katachka said:


> The reason behind this is that we cannot get married and my partner is paying the mortgage together with me, so she is entitled to the half of the property which is almost repaid at this stage.


 
If you are considering the transfer to your daughter in order to protect your partner who has paid half the mortgage but is not on the deeds, could you not instead draw up a legal agreement stating that you agree if the property was to be sold she would get half the proceeds and also that if you were to split up then she should get half the value of the house.
In other words there are other ways for your partner who pays half the mortgage to be protected.


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## csirl (20 Sep 2010)

Katachka said:


> well, we went to the bank and they didnt have any problem with putting my partner as a 50 % owner of the property as they were getting a second guarantor on the mortgage repayments as opposed to one they have at the moment.. the thing is that she would lose her first-time buyer relief if we do so, therefore we were thinking to put our daughter as a second owner and her mother would give a personal guarantees on the repayments together with me, what do you think?
> The reason behind this is that we cannot get married and my partner is paying the mortgage together with me, so she is entitled to the half of the property which is almost repaid at this stage.


 
Revenue are wise to this type of arrangement - they come across it all the time. They will still regard your partner as being the beneficial owner and she will lose her first time buyer status.


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## nuac (20 Sep 2010)

Your mortgagee are most unlikely to agree to what you propose.    No bank likes to have to repossess and evict, but they like to retain the option to do so.

If they did agree to this arrangement, and had to seek repossession while your daughter is still under 18, they would be in severe difficulties.

Also as already advised Revenue do not like unusual transactions.

Talk to your solicitor.


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