# Gift of a house from parents



## ilean (13 Apr 2013)

Can my partner's parents gift him a house(their family home)  even though we already own our own home?


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## Joe_90 (13 Apr 2013)

They can gift him what they like.

If you are asking if he can get the dwelling house exemption from CAT then the answer is no.

The gift is subject to CAT with the parent to child threshold.


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## ilean (14 Apr 2013)

Thanks Joe 90..Yes it is below the Child Threshold so that is fine.

We are hoping to 'gift' them back in the way of cash as they are retired-we know we can gift them €3000 each a year..but it says you may gift more  .."payments for support, maintenance and education of members of the family which are part of normal expenditure"

Can anyone here clarify what is meant by that-does it mean we can also give additional funds for their care such as medications, transports cost to doctors etc to support them as they get older and are not working? Would receipts be needed? Is there a limit for this?

Any help would be very very much appreciated.
Thanks


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## wbbs (14 Apr 2013)

Depending on your income and theirs and if they are over 65 there is an option to do a Deed of Covenant for up to 5% of your salary p.a. which can be a tax efficient method.


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## ilean (14 Apr 2013)

The father is over 65 year but my other half is self employed ( for the last year only) so how would we calculate his salary.

Both parents are retired -no idea of their income though-

we are hoping to get a tax consultant in Tipp/Lim area in the next day or 2 to try and sort it out but looking for any advice so we know we have some idea of what we can do.

They want to gift son (my OH) their old house which is under the 225K Threshold so no CAP only transfer fee of 1% the current  value-Are we correct in this? Is there any other cost/tax?

We in turn would like to help them out financially as they retire and live in UK so were thinking a gift of €3k each a year which is tax free as they are his parents?
We would like to give them more if there was a way esp if one were to die and the other one was alone and incurring medical bills etc.

Obviously we would like to do this without incurring any/too many taxes/costs on either side


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## Joe_90 (14 Apr 2013)

@wbbs, that's interesting.  I'm not sure that a covenant after a gift of est. €150k would qualify! http://www.revenue.ie/en/tax/it/leaflets/it7.pdf

OP I think you are over thinking this. If your OH were to "pay" for say half the value of the property and defer the payment over 10 years, then he does not use up his threshold and there is no gift on the way back to his parents.


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## wbbs (14 Apr 2013)

Not sure what gift of 150k you are talking about and the impact on a covenant.

OP, I don't know if there is any benefit to doing one if they live in the UK and for it to benefit yourselves you would need to be in the higher rate of tax which you may not be if only started a business.


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## ilean (14 Apr 2013)

Thank you both for the replies..

We don't care about the 'gift' back to them being of any benefit to us once it doesn't cost us and them for accepting the money. 

Essentially we would like to gift them back the value of the house so they are taken care of in their retirement.

We have had the house valued at 220K and that is the agreed with both parties.so that part seems fine-they gift him the house and we incurr tranfer cost of 1%.

It is the gifting back we have problems with. they would like to be gifted back over 20 yrs but as the dad is older than the mam he fears he will not be around for the 20 years and there is question over how much we can gift annually without them being stung for gift tax. So we can give them 6K for now a year but are seeking means to give them an additional 2-3K a year that is above board but not subject to any/many costs. 
The Deed of Covenant may be the way to go either now or when one of them passess away for security reasons-ie guarantee an income for them.

we say this on the revenue site and was wondering what was meant by it 
"."payments for support, maintenance and education of members of the family which are part of normal expenditure""

does this mean if we have receipts etc we can gift them additional funds annually over the Threshold of €3k each to cover essential expenses they can't meet such as poll tax? medical bills?


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## Joe_90 (14 Apr 2013)

Back up the bus a small bit.

If your a "paying" for the property then there is no gift!

They agree to transfer the property to your OH and in return he pays them over a number of years.  What is he going to do with the property?


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## ilean (14 Apr 2013)

We are living in the property-our family home.


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## ilean (14 Apr 2013)

Joe 90..it is a gift -that we have agreed on ..
They were going to sell the property and use the funds to support them in retirement

so as they are giving us the house we have agreed to support them instead-there is no contract to say we have to pay back the value of the house and they have no tie with the house once it is gifted to son.

It is the supporting them we are having trouble with as they want some security on the amount we can give -if they sell the house they would have a lump sum to live off. This is not happening and we want to make sure if they need a large sum for medical emergency or property problems we can gift them the necessary funds without them incurring tax.


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## Joe_90 (14 Apr 2013)

Fair enough, if you pay for it it's not a gift in my view but it's your interpretation. 

 I don't know anything about UK CAT so I can't provide anything if you insist that it's a gift.


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## ilean (14 Apr 2013)

Thanks Joe..
any financial gift we give them in the Uk-is that subject to Irish or UK threshold? do you know as we would be paying in euro but they would transfer to £

and thanks again


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## Mrs Vimes (14 Apr 2013)

You yourself can also gift each of them €3,000 per year - you do not need to be related to avail of the small gift exemption.

Would it not be easier to just buy the house from them, possibly for below market value?


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## ilean (14 Apr 2013)

Thanks-
we can't afford to buy the house -this is also the family business office so we need to spend our savings converting the garage to office and reclaim the whole house for a family home so would not even have a deposit for it.
We discussed them putting a charge on the house so we would buy it in installments but that may cause problems should we need to borrow against the house ( for our young family or for their needs in UK as the house would be our only and their only security). There was also the issue of getting this house on an interest free loan and the revenue seeking tax on the difference between this loan and a mortgage we would get from a bank.

We have agreed gifting the house is the best way but supporting them in their old age is the problem as we don't want them incurring any tax if we send them over money -but we also want to do it legally-


we thought its was possible to only receive 3K per yr in total so we could give each 3k..the issue arises if they need more than this for living/medical expenses- we have agreed to cover any of these but need to know is there a way of doing this by giving them extra each year to put away or a lump sum in the future?

it is not as easy as we had thought when this was first decided upon!


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## Mrs Vimes (14 Apr 2013)

I don't know the situation in the UK but in Ireland a person may gift another person up to €3,000 per annum under the small gift exemption without any CAT arising.

There isn't any limit to how many people one may gift or how many people one may receive a gift from.

As such, a couple can gift another couple up to €12,000 each year. (ie €3,000 from each to each)


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## ilean (14 Apr 2013)

Sorry to question you but are you 100% of that??? because that would solve our problem..

we read it as you could only receive €3K a year-so each could only get 3k each a year from us,,,not 3k from each of us ( 6K in total)


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## Mrs Vimes (14 Apr 2013)

here is Revenue's leaflet on the topic, although now I read it it's possibly less clear than I remembered.

It says: "the first €3,000 of all gifts taken by a donee from one disponer in any calendar year." could I suppose be read to imply that it applies to only one disponer, but I found a clearer explanation on [broken link removed] site:



> *How many can you get?*
> Any gift from a disponer qualifies provided the annual limit of  €3,000 is not exceeded. Therefore , you can receive €3000 each, from  several different people without incurring a liability. Also each gift  does not use up any of your class threshold for that class of giver."



This would solve your problem, but as I say they do have very different rules on CAT in the UK so you should seek advise there too.


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## ilean (14 Apr 2013)

Many thanks for showing us this Mrs Vimes..we will get this confirmed by a tax consultant tomorrow as soon as we find one..

The parents have Irish and UK bank accounts so we can gift into whatever is most suitable..

again if this is the case that they can get €3k each from different people you have made it possible for us to stay here in what we now consider our family home so I am very very grateful.


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## mandelbrot (14 Apr 2013)

What in the name of God is all this about?! Joe put it very well when he suggested backing up the bus, and now I must demand that you stall the digger!

OP this is very simple and straightforward - and you are complicating the life out of it.

What's actually happening here is quite clear - no matter what way you are dressing it up - the parents are giving the house to their son and you, and in return ye are going to give them money, over a period of time. This is consideration; it's a fairly transparent arrangement. It doesn't matter if you call it them gifting you a house and you subsequently gifting them money - that's clearly not what is going on, as there's an understanding that in consideration of them signing over the house to you and hubby, ye will provide for them in their old age.

I'll put it this way - let's say you and hubby decided after the transfer to pull a fast one and that you weren't going to give them a single shekel. Would they have grounds to sue you for the amount agreed? If you think, based on the discussions you've had and agreements made between both couples, that the answer is yes, then there's no gift. For this reason, a deed of covenant will simply not wash either:
_"Payments under a Deed must be made without any benefit being  received from the covenantee in return, either directly or indirectly."_

The correct way to address this IMHO would be something along these lines:



 They transfer the property to ye, and the transfer is subject to a requirement that you pay _*X*_ amount per annum to the parents, for the remainder of their lives (i.e. as long as either of them survives).
 Now you have two capital amounts that can be valued - the value of the property being transferred, and the value of this obligation to pay _*X*_ amount annually as long as one of the parents remains alive. This can be valued using prescribed formulae.
 The difference between the two amounts will be a gift from one party to the other.
 Since they are old, one would expect the capitalised value of the _*X*_ p.a. will be substantially less than the 220k value of the house, so the gift will be from the parents to the child, so no CAT issues there.
 It also leaves you in a position of having substantial equity in the house should you need to borrow against it.
 The payment of _*X*_ p.a. is now not an annual "gift", but is consideration (i.e. purchase price paid over time) of the house.
Lastly and very importantly - It also gives the parents security/certainty that they can't be screwed over - now I'm not suggesting that you and your hubby would attempt to do this, but some of the things families do to each other over money/assets are simply unbelievable, and it's simpler if the whole thing is nailed down and everyone knows where they stand.
 
You'll need proper legal advice, but I don't see why the above couldn't be formulated in an agreement


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## ilean (14 Apr 2013)

Mandelbrot..we are trying to make it simple but so far

they wanted to sell us the house and put a charge on it as security which we said no to as it would mean no security for us until the house was paid for in full.

So then we asked about what you suggest-we were advised-
"There may be a tax issue arising because the "loan" of the house value is to be interest free and the Revenue Commissioners will treat an interest free loan as a gift of the amount of interest that would be paid in the marketplace"

Also the MIL is still young and should be around for 20-30yrs so in fact the full amount for the house may be paid back to her before she dies- so there would be no difference in value of house and total monies given to them.

So lastly we suggested a straightforward gift of house to son and then we make them annual gifts to support them for the next 20 odd years-we are open to signing a contract to this affect but are unsure :
1- how much we can gift each year to each of them before tax occurs-we know son can gift them €3K each but can I gift them extra on top of that?

2- if there is a contract saying son will give them €3k each a year until death is that still treated as a 'gift'?



we are a young family-2 young kids and starting out on a new business so funds will be low and savings gone on house work ( if we ever sort this out) but we know and agree the parents need some sort of security but we also need to be able to make sure we can give them what we can when we have it- 

I would have gone along with your suggestion expect we were told by solicitor about the implications of not paying any interest on the loan and with today % rates on mortgages that could be more than we can pay on top of payments.

I do really appreciate the advice as we are looking at this every which way to try and find a way to suit all , giving them security while making sure we dont end up paying tax we cant afford making the house not worth getting.


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## mandelbrot (14 Apr 2013)

Sorry, but you don't seem to be getting the key point here - you can't get around this with "gifts" - the fact that you're putting it in quotation marks yourself shows that you know that they're not really gifts.

If the money is changing hands because of the transfer of the house then you can't call it a gift, that's the bottom line.

I'll try putting it another way - if his parents don't transfer you the house, will ye still be gifting them somewhere between 6 - 12k annually? If the answer is no, then I don't see how you can logically say that if they DO transfer ye the house the money you give them will be a gift.


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## mandelbrot (14 Apr 2013)

ilean said:


> they wanted to sell us the house and put a charge on it as security which we said no to as it would mean no security for us until the house was paid for in full.
> 
> * So then we asked about what you suggest-we were advised-
> "There may be a tax issue arising because the "loan" of the house value is to be interest free and the Revenue Commissioners will treat an interest free loan as a gift of the amount of interest that would be paid in the marketplace"*
> ...



The bold bit in particular makes me think that either you don't understand what I proposed in my first post, or else you need a better solicitor/advisor.

Under the transaction I proposed there is no "loan" - there is a straightforward transaction of one capital asset being exchanged for another - they're giving you a house on the one hand, and you're giving them an annuity of sorts on the other hand.

You and your hubby agreeing to pay (say) 8k p.a. to his parents for as long as they survive, is a capital amount that can be actuarily valued, a calculation which involves implied interest rates.

This is fundamentally different to the consideration being agreed as (say) 150k, and you not paying it immediately (because you don't have the money or access to a mortgage for it), in which case the 150k outstanding becomes a _de facto_ loan.

The more I think about the more ways around it there probably are. If you want to get the optimum solution you need to be willing to pay for good professional advice to save you from tax exposure in the immediate and importantly the long-term.


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## ilean (14 Apr 2013)

Mandelbrot
To be honest they couldn't sell this house right now for anywhere near the valuation probably as it is in the sticks and needs work. If they were not to gift us they house then it would lay empty as we would move out to find a home somewhere else-leaving it with damp, a rood that needs redoing  and all sorts happening and as such they could lose 1000s on the price and yes we could end up giving them money to get them through their old age..as any kid would so for their parents I suppose to make sure they are comfortable. 

We had hoped the house and giving money issues could be dealt with as two different things-sounds simple when you have never done anything like this before but we are learn it all ain't as easy as that.

as well as that they will be waiting for any monies as we will be broke from the house renovation and repairs!

thanks again for your advice and honest comments-we have a lot to think and sort asap as the builders are only holding a slot til Wed and after that cant guarantee they can do the work this summer for us...


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## ilean (14 Apr 2013)

Mandelbrot

"The more I think about the more ways around it there probably are. If you want to get the optimum solution you need to be willing to pay for good professional advice to save you from tax exposure in the immediate and importantly the long-term."

that is the plan tomorrow as soon as we get hold of someone in the tipp/Lim area who can help

Solicitor is the FIL not ours-we dont have one!

We will suggest what you said about exchange and not making it a loan-straightforward transaction of one capital asset being exchanged for another 

Again many thanks- to you and all the other posters..at least we know there are issues there to be investigated that can reduce any tax we pay and give them security


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