Key Post Any advantage in gifting a house now instead of leaving it in the will?

I hope I'm allowed ask this, apologies if I'm not.

My parent's house is worth about €1m and all going well, it will eventually go to me.

My question is, would it make sense, given the current slump in house values, to consider transferring the house to me now, while they are still alive, instead of waiting to inherit it in maybe 20 years time, when prices are likely to have recovered?

By how much would the value need to rise by over that period, to make transfer now more sensible than waiting?

Are there any other angles to consider?

Re: Inheritance vs transfer while alive in today's market

This is a perfectly legitimate estate planning problem which is often raised by the parents themselves.

I have deleted off-topic replies.

Brendan

Re: Inheritance vs transfer while alive in today's market

As it is your parent's principal private residence, there will be no CGT on its disposal either now or when they die.

You will be subject to CAT on the excess of your parents, estate over €434k.

While house prices may well rise over the next twenty years, it is likely that the CAT exemption limits may well rise as well.

If you transfer it now, you will pay CAT and stamp duty. I don't think it's worth paying that now in order to avoid a potential tax liability in 20 years.

As I write this, I wonder if their wills should be written so that on the death of your first parent, they leave you their half of the house to use up their gift to you of €434k. And then on the death of the surviving parent, you might get another €434k?

Brendan

Re: Inheritance vs transfer while alive in today's market

The €434k is a total for all people in Group A (for CAT purposes), so you don't get €434k X 2. If you inherit from one parent first and then inherit from another, the first inheritance has to be taken into account before calculating the second liability.

Re: Inheritance vs transfer while alive in today's market

Thanks WaterSprite

So there is no tax reason for doing this.

There is also a very practical reason for not doing it. Consider the following story.

Widow gets on very well with her daughter and son-in-law. She makes over the house to them and they move in. They sell their own home. Widow minds the grandchildren. They all live happily ever after until...

Daughter dies suddenly. No real problem. Son-in-law and mother get on great still. Granny is now more useful than ever.

Then son-in-law remarries. New wife wants granny out of the house and out she goes.

And it does not have to be that tragic.

So, in your case r9, you may have the best of intentions. In ten years time, you may split up from your wife. The house would be part of the assets to be considered when doing the settlement.

So, all in all, a bad idea.

If they have other financial assets such as shares, it might well be worth considering transferring some of these to you now.

Re: Inheritance vs transfer while alive in today's market

Also dwellinghouse exemption would not apply on a gift to you unless you met certain conditions among which:

Gifts taken on or after 20 February 2007​

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Re: Inheritance vs transfer while alive in today's market

Thanks everyone.
Our specific idea releated really to the current housing market. i.e. would it make sence to transfer ownership when the house's valus is very low rather than wait untill the market recovers.

Am I right in summing up that the principal differance in a pre or post mortem transfer is stamp duty? Or does the €434k allowance only apply to transfers after death?

If the CAT exemption is allowable anytime (alive or dead), then isn't the decision simply whether or not I think the tax payable(on the difference between the CAT exemption limit and the market price) will rise by more over the years, than the stamp duty I would have to pay if we did it now?

Re: Inheritance vs transfer while alive in today's market

The principle difference is stamp duty unless you would qualify for dwellinghouse exemption on a death ( ie have been living there three years before the death/benefit) while you might not on a gift during their lifetime.

After that then the things to consider are present house value, present threshold and rate of tax versus what will be there in the unspecified future date.

Re: Inheritance vs transfer while alive in today's market

Revenue periodically set a new base date for the exemption limit. It could be possible that transferring 50% of an estate a good few years before transferring the rest could enable someone to claim up to their CAT limit twice.

"The Bill will confirm that the base date for aggregation for CAT purposes has being brought forward from 2 June, 1982 to 2 December, 1988. Only those gifts or inheritances taken on or after 2 December, 1988 will now be aggregated when computing capital acquisitions tax on all gifts or inheritances taken on or after 2 December 1998. "
http://www.finance.gov.ie/viewdoc.asp?fn=/documents/Publications/legi/fb99publist.htm#54

There may well be anti-avoidance rules to stop this.