# Inheritance of parents home...only child



## amtc (28 Jul 2016)

Before I start this I want to impress that neither of my parents are dying and neither would I want them to..

I was listening to a financial expert on tv3 and he was explaining about inheritance tax. 

Both my parents have willed all their assets to me as their only child. The house is solely in my mother's name. I have my own house BTW. 

From the 200k tax threshold looks like I would have to pay tax on the house. The expert said that the Revenue can force you to sell the house to pay tax. Is this right?


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## Branz (28 Jul 2016)

The  Group A threshold is now 280k and is expected to go up in the next Budget.
Yes re Revenue if you don't have the cash and there is no other cash in the estate to cover the bill.

Without prying, are you married with kids that might benefit from Group B
This would require the house to be sold for them to get the mula but....
http://www.revenue.ie/en/tax/cat/thresholds.html


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## Joe_90 (28 Jul 2016)

As above the first €280k is exempt.

So if the house is worth €500k it's €220k x 30% or €66k.

So you get an asset worth €500k and have to pay tax of €66k.

There is a very generous relief known as dwelling house relief which you could consider if you are very concerned about it issue.


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## amtc (28 Jul 2016)

No...not married. No kids. Maybe I should pop off to Coppers....!

No I'm not very concerned. Just wondered. Seems low for a Dublin house. I suppose I wondered as is in my mother's sole name if that made any difference.

Had a look at the dwelling house relief. I would have to move home. That may only hasten all of our deaths. Most likely mine.


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## Gordon Gekko (29 Jul 2016)

You wouldn't have to move home to be fair...a common misconception


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## T McGibney (29 Jul 2016)

The OP can't claim the dwelling- house relief unless "at the date of the gift/inheritance, (they are) beneficially entitled to any other dwelling- house or to any interest in any other dwelling- house". 

http://www.revenue.ie/en/tax/cat/leaflets/cat10.html

So they'd have to dispose of their own house, and live in their parents' house for at least 3 of the next 4 years.

A big hurdle.


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## Dan Murray (29 Jul 2016)

Gordon Gekko said:


> You wouldn't have to move home to be fair...a common misconception



Gordon,

What do you mean by this?


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## Branz (29 Jul 2016)

perhaps he means the win resident exemption
86 Exemption relating to certain dwellings

Summary

This section provides that gifts or inheritances of a dwelling-house taken on or after 1 December 1999, will be exempt from capital acquisitions tax provided the following conditions are complied with:

 the recipient must have occupied the dwelling-house continuously as his/her only or main residence for a period of 3 years prior to the date of the gift or inheritance. Where the dwelling-house has directly or indirectly replaced other property, this condition may be satisfied where the recipient has continuously occupied both properties as his/her only or main residence for a total period of 3 out of the 4 years immediately prior to the date of the gift or inheritance;

 

Any period of occupation by a beneficiary of a gift of a house that was during that period the disponer’s only or main residence will not be regarded as a period of occupation in the house prior to the gift of that house unless the disponer is compelled, by reason of old age or infirmity, to depend on the services of the beneficiary for that period. The house that is gifted, or any house that it replaced, must be owned by the disponer for the

s 85


the recipient must not, at the date of the gift or inheritance, be beneficially entitled to any other dwelling-house or to any interest in any other dwelling- house; and

the recipient must continue, except where such recipient was aged 55 years at the date of the gift or inheritance or has died, to occupy that dwelling-house as his/her only or main residence for a period of 6 years commencing on the date of the gift or inheritance i.e. the relevant period.

110

(1), (2)


Part 9: Exemptions
relevant 3-year period prior to the gift.

A recipient absent during any time in the relevant period because of working abroad is considered to remain in continuous occupation of that dwelling-house. The exemption will not be withdrawn where a breach of the condition regarding occupation subsequent to the gift or inheritance is as a result of the recipient requiring long-term medical care in a hospital, nursing home or convalescent home, or as a result of a condition being imposed by an employer on a recipient to reside elsewhere.


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## Gordon Gekko (29 Jul 2016)

T McGibney said:


> The OP can't claim the dwelling- house relief unless "at the date of the gift/inheritance, (they are) beneficially entitled to any other dwelling- house or to any interest in any other dwelling- house".
> 
> http://www.revenue.ie/en/tax/cat/leaflets/cat10.html
> 
> ...



You obviously mean "they are not"...Dan, they wouldn't have to live together was my point.


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## Dan Murray (29 Jul 2016)

Gordon Gekko said:


> You wouldn't have to move home to be fair...a common misconception



Hi Gordon,

Can you explain what this means please?


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## Gordon Gekko (29 Jul 2016)

The "child" can move into the property after the parents have died. No need for cohabitation.


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## Joe_90 (29 Jul 2016)

Gordon Gekko said:


> The "child" can move into the property after the parents have died. No need for cohabitation.



Please explain how this works I'm intrigued! Trust?


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## Vanilla (29 Jul 2016)

Delay?


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## Gordon Gekko (30 Jul 2016)

Joe_90 said:


> Please explain how this works I'm intrigued! Trust?



Yep...property pops into a simple discretionary trust until such time as the beneficiary has done his/her three year stint.


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## Joe_90 (30 Jul 2016)

Interesting!  

So say for example the house is worth €500k discretionary trust tax @3% In year 1 and 1% in years 2&3 so €25k there.

Extra round of legals to go into trust and then out of trust. Say €5k.

Potential CGT in the trust for increase between date of death and distribution let's say 10% over 3 years that's €25k x 33% = €8k.

Total €38k.  So saving of €28k on taking the gift works at €500k for one child and benefit goes up by €25k for every €100k (33% - 5% - 3.3%).

We would look at the child selling their house and a daughter in law buying a nice house that the parent could move into.  The child moves into the parents house and the child pays down the loan on the house the parents live in and after the 3 years the parents gift the house to their child as he has no property in his name. 

There is also the benefit that the second house is exempt from CGT under PPR. 

That's for assets North of €750k and it suits both parties to move.

We also have clients converting assets into residential property to pass it on at zero CAT.  Seems rather strange that if you give a child over €280k in cash the taxman takes 33% but if you give it in bricks and mortar he gets nothing.

Not sure how much longer the dwelling house exemption will last in its current form perhaps it will be reduced to the cost of an average house or the Class A threshold.  So a child could get €560k tax free.


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## Dan Murray (30 Jul 2016)

Thanks Joe and Gordon

Very, very interesting!!

So, can I just summarise what my understanding of what's been said (and hopefully you can confirm please!! )

1. Parent provides that his PPR goes into discretionary trust upon his demise

2. Discretionary trust is "designed" to be distributed to his son

3. Son, moves into my house for three years once parent has passed to the other side

4. During this 3 years, son needs to sell his own house

5. Once son has lived in "parent's" house for three years, the discretionary trust is distributed whereby son becomes the official owner.


My questions are:

a) Is the above understanding correct?

b) What taxes are involved in setting up and operating a discretionary trust?

c) Is stamp duty payable involved at any stage in the process?

d) Can you explain the CGT liability - are we saying that the increase in the property value within the trust is subject to CGT? If yes, in Joe's example, if the property has increased by 10%, would the gain be c. €50k (on a €500k house) rather than the €25k shown?

Thanks!

Dan


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## Dan Murray (2 Aug 2016)

Just bumping this to see if I'm on the right track?!


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## Gordon Gekko (2 Aug 2016)

Your understanding is correct.

6% Discretionary Trust Tax arises upfront. Then 1% in Year 2 and another 1% in Year 3. Then half of the 6% is refunded (when the property is appointed to the beneficary). So an overall leakage of 5%.

There shouldn't be stamp duty.

In theory, there could be CGT on any uplift during the three year period. In practice, given the relative stability of the market, and appropriate valuations, any leakage is minimal.


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## Dan Murray (2 Aug 2016)

Thanks Gordon,

This is a very, very significant bit of advice - very definitely "Key Post" material.

Fair play....

Dan


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## Gordon Gekko (2 Aug 2016)

Dan Murray said:


> Thanks Gordon,
> 
> This is a very, very significant bit of advice - very definitely "Key Post" material.
> 
> ...



With a short lifespan though (probably)...the Dwelling House Exemption will go the way of the dodo in October I reckon. Some high profile individuals have done the proverbial dog and ruined it for everyone else.


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## Dan Murray (2 Aug 2016)

......the Gekko giveth and the Gekko taketh away


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## Gordon Gekko (2 Aug 2016)

Dan Murray said:


> ......the Gekko giveth and the Gekko taketh away



I could be wrong. If common sense prevails, a cap will be introduced (perhaps €1m or €500k).


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## Dan Murray (2 Aug 2016)

Thanks again, Gordon

I'm not shooting the messenger here!

Like you say, an intermediate ground would be sensible but who knows?


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## theresa1 (17 Sep 2016)

I have been left family house from my Parent (lived in it all my life - no property interests myself)and my Solicitor has been dealing with everything like Probate and the Land registry. I advised them I am covered by the dwelling house exemption so they noted that on the forms sent to Revenue.

I got a letter in post saying I have to file an inheritance tax return and pay any arising tax liability.

Do you still have to file even though no money is due? I'm not registered for the Revenue On-Line Service (ROS).

Would my Solicitor do this return for me? I got a Form IT38S but I don't think i can use this and the questions I'm not even sure how to answer them.

Any advice appreciated.


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## noproblem (17 Sep 2016)

Gordon Gekko said:


> I could be wrong. If common sense prevails, a cap will be introduced (perhaps €1m or €500k).



Am I correct in assuming that this indeed has gone the way of the dodo? If so, does it impact on wills already made but everyone still living?


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## Gordon Gekko (17 Sep 2016)

noproblem said:


> Am I correct in assuming that this indeed has gone the way of the dodo? If so, does it impact on wills already made but everyone still living?



Not yet


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## Curlywurly (22 Sep 2016)

theresa1 said:


> I have been left family house from my Parent (lived in it all my life - no property interests myself)and my Solicitor has been dealing with everything like Probate and the Land registry. I advised them I am covered by the dwelling house exemption so they noted that on the forms sent to Revenue.
> 
> I got a letter in post saying I have to file an inheritance tax return and pay any arising tax liability.
> 
> ...



Hi theresa1. I understand that you have to file an IT38 and apply for the dwelling house exemption on that form on ROS. Even if there is no tax due you must file the IT38. You must apply for the exemption and Revenue must grant it before you can be exempt from the tax. You will have to register for ROS first as the online form is the only way you can apply for the dwelling house relief. The tax office in Dublin O'Connell St are very helpful if you have any problems. They have a phone helpline which operates mornings only and a public office if you are in Dublin. You should be able to get the contact details on www.revenue.ie


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## Gordon Gekko (22 Sep 2016)

Yes, you submit a return (IT38) and claim the exemption.

Then prepare to be audited.


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## Pugmister (22 Sep 2016)

Gordon Gekko said:


> I could be wrong. If common sense prevails, a cap will be introduced (perhaps €1m or €500k).



Gordon, has any further information come to light on this. I have dome some googling and nothing has really been reported. Reason for asking is I am currently two years and one month living in a home owned by my parents. The reason for moving here was to avail of this relief.


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## rob oyle (22 Sep 2016)

Pugmister said:


> Gordon, has any further information come to light on this. I have dome some googling and nothing has really been reported. Reason for asking is I am currently two years and one month living in a home owned by my parents. The reason for moving here was to avail of this relief.


You're unlikely to hear anything concrete until budget day. In saying that, it might not happen until (for example) budget day next year, or the year after. 'Word on the street' is this relief is being abused and like any tax measures that are abused*, they tend to be closed off sooner or later.

*Corporation Tax avoidance need not apply.


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## Pugmister (22 Sep 2016)

rob oyle said:


> You're unlikely to hear anything concrete until budget day. In saying that, it might not happen until (for example) budget day next year, or the year after. 'Word on the street' is this relief is being abused and like any tax measures that are abused*, they tend to be closed off sooner or later.
> 
> *Corporation Tax avoidance need not apply.



I guess it's a case of fingers crossed so and hopefully the people who aren't abusing the current relief aren't effected as much as those who are


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## Gordon Gekko (22 Sep 2016)

Nothing concrete as yet.


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