Aunts house implication

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wiseolsham

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Hi all. First up appreciate your time reading this.
A few months ago my aunt passed away. When she created her will she had left her house to my parents. My parents want to gift me the house so we can renovate etc

I’m not 100% on what happens next. And yes I will be talking to a solicitor over the next week or two but I’d appreciate anyone offering a few thoughts so I can get my head around it.

If my parents gift me and my wife this house it’s tax free up to €335k, or specially if they gift it to me. Anything else I’m paying CGT on anything over that based on a valuation of the property on the date of death. Have I got this right?

I take it there is no other way to make this better tax cost wise.

I’m totally new to all this and it’s something I hadn’t expected to be like this. Looking at the revenues property tax calculator this place falls in the 500k band. Which would mean that I’d have to pay 50k plus just to have the house in my name.

Maybe I’ve got this all wrong but would welcome any opinions or alternative ideas if that’s even possible. Thanks
 
Thanks for the reply Brendan. No idea if the value of the property yet to be honest but looked at the area with the LPT calculator which I guess is probably not the best idea in this scenario.

No other property from my aunt. This was her home all her life and for the last few years she was bed bound.
 
OK, so at a rough guess, it's worth €500k

Not an expert, but here is what I think will happen. You do need to sit down with a tax expert, as soon as possible, to plan it.

There are two separate taxes you need to consider. People often confuse them.
Capital Acquisitions Tax is the technical name for Inheritance Tax and Gift Tax
Capital Gains Tax is the tax on the increase in value of an asset when it is sold.

The following figures are rounded as they all depend on the actual value of the property.

1) Your parents will have to pay Capital Acquisitions Tax on what they inherit from your Aunt. I am not sure how joint gifts are handled, but they will have a threshold of about €50k. So they will pay 33% on €450k or €150k.

2) The Executor will pay Capital Gains Tax on any increase in value between the date of death and the conveyance of the property to your parents.

3) When you get a gift worth €500k from your parents, you will have a threshold of €335k, so you will pay CAT of 33% on the excess or about €50k as you have already calculated.

What would happen if your parents disclaimed the inheritance? Would you get it or did she have closer relatives who could claim it?

If your Aunt had left it directly to you, the CAT would be €500k - €35k @33% or €150k

Brendan
 
Do not rely on a solicitor for tax advice. They will just tell you what tax is due.

Go to an accountant or tax expert who will advise on the best plan to minimise the tax.

Brendan
 
Brendan Burgess said:
OK, so at a rough guess, it's worth €500k

Not an expert, but here is what I think will happen. You do need to sit down with a tax expert, as soon as possible, to plan it.

There are two separate taxes you need to consider. People often confuse them.
Capital Acquisitions Tax is the technical name for Inheritance Tax and Gift Tax
Capital Gains Tax is the tax on the increase in value of an asset when it is sold.

The following figures are rounded as they all depend on the actual value of the property.

1) Your parents will have to pay Capital Acquisitions Tax on what they inherit from your Aunt. I am not sure how joint gifts are handled, but they will have a threshold of about €50k. So they will pay 33% on €450k or €150k.

2) The Executor will pay Capital Gains Tax on any increase in value between the date of death and the conveyance of the property to your parents.

3) When you get a gift worth €500k from your parents, you will have a threshold of €335k, so you will pay CAT of 33% on the excess or about €50k as you have already calculated.

What would happen if your parents disclaimed the inheritance? Would you get it or did she have closer relatives who could claim it?

If your Aunt had left it directly to you, the CAT would be €500k - €35k @33% or €150k

Brendan
Click to expand...
Super. Thanks so much Brendan.

She didn’t have anybody closer or any other relatives who could claim it. As this is all new to me and my parents I’m not 100% on what they have paid or what their setup was. But now I’m armed with some info and I really appreciate that. Thank you.
 
wiseolsham said:
I’m not 100% on what they have paid or what their setup was.
Click to expand...

If your aunt died only a few months ago, it's very unlikely that probate has been granted and the house transferred to your parents.

1) Check with a tax advisor what the best plan would be.
2) If they suggest that your parents should disclaim their inheritance, check with a solicitor if that is possible.

But do it now before probate is granted.

Brendan
 
Brendan Burgess said:
Do not rely on a solicitor for tax advice. They will just tell you what tax is due.

Go to an accountant or tax expert who will advise on the best plan to minimise the tax.

Brendan
Click to expand...
That was going to be my next question. Thanks again Brendan. This has been super helpful. And disappointing / flabbergasting at the same time
 
Had a long conversation with my parents earlier who were unsurprisingly very unaware of all of this. They obviously don’t want to be lumped with a huge tax bill for something they don’t / won’t use. They haven’t spoken to solicitor or anything yet about anything to do with the will.

Open to correction on all this but first step here I guess besides talking to a tax advisor / accountant is the property will have to be valued. As everything seems to hinge on that. Once we get a property value we should be looking at the possibility of my parents to disclaim it and then it goes to me. Then I’m liable for the CAT / CGT on the property and my parents don’t have any tax bill.

So does that make sense? Or have I missed a step?

Depending on the value I may well not be able to afford the tax bill. What happens in that case? My parents disclaim it and I do the same. There is nobody else to take it. So what happens then?

As an alternative option does this work. My parents take it, sell it to me for whatever the market value is, then they pay the CAT with the selling price. And I go from there.

This has being like a bomb exploding for my parents and myself. As grateful as I am for this opportunity, the fact that a high valuation can sink the whole thing is soul destroying. Regardless whether it’s the law of the land or not.

We’re not the first family to come upon this problem nor will we be the last. But for minds sake it’s great to get some idea of what’s actually happening and I’m really grateful for the insights I’ve got so far and would really welcome anymore.

Thanks again.
 
It's not a case that nobody takes it, that would be silly! They take it, sell it, pay the tax and have the rest of the surplus to keep or distribute as they want. Still better off than they were before, just don't have the actual house but still have an inheritance.
 
You might advise the person who is doing the valuation that you wish the property too remain in the family.

Brendan - re tax expert,if he/s gives advise too reduce the tax due,would this be legal ?
 
I totally understand that. But this is land my family have been born and bred on so selling it is something they’d never want to do. And to be honest I see it as my “natural” home to finish out the rest of my days. And yeah I get it. History and emotion are irrelevant in the bigger scheme of things but not so easy realistically.

Obviously there might be no choice in the matter but I know it would finish them off. Either way this just seems to be painful in the fact that neither my parents or me may have the capability to pay the CAT on it.
 
Pinoy adventure said:
You might advise the person who is doing the valuation that you wish the property too remain in the family.

Brendan - re tax expert,if he/s gives advise too reduce the tax due,would this be legal ?
Click to expand...
Hey thanks for the reply. That’s interesting. Essentially so they’re “marking down” the value of the property. Is that a potential minefield in the future then
 
wiseolsham said:
This has being like a bomb exploding for my parents and myself
Click to expand...

You need a bit of perspective here.

You will end up with a house worth €500k which might cost you about €200k in tax.
So you are "up" €300k.

It only seems like a bomb because you were under the impression that you could get an inheritance without any tax implications.

Thousands of people would be happy to bear this "bomb" if you don't want it.

Brendan
 
Brendan Burgess said:
You need a bit of perspective here.

You will end up with a house worth €500k which might cost you about €200k in tax.
So you are "up" €300k.

It only seems like a bomb because you were under the impression that you could get an inheritance without any tax implications.

Thousands of people would be happy to bear this "bomb" if you don't want it.

Brendan
Click to expand...

Thanks for that Brendan. That’s a good way of putting it. And I appreciate that.

However perspective isn’t as easy to comprehend and see when you’ve never dealt with anything like this before.
As I haven’t. That’s why I came here to get some understanding of the whole thing so when I do take advice that it helps me have a better perspective on what’s going on.

I was under no illusion that there would be zero tax implications.

To put things in another perspective I have elderly parents that have zero idea about any of this. My mother didn’t think when she lost her sister that she’d be lumped with a bill of 200k or whatever it would be. Because she just didn’t know. And yeah, the onus is on each individual To know their own tax affairs. But not everybody is up to date. If they were nobody would be on here asking for friendly advice and opinions.
 
Wiseolsham you may also be able to get a mortgage on the property to clear the tax bill. This would make more sense than disclaiming.
 
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