Buy new or renovate family home?

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Fisoon

Registered User
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Personal details

Your age: 29
Your spouse's age:
Partner's age if not married: 28

Number and age of children: 0
No siblings or other family. Only child


Income and expenditure
Annual gross income from employment or profession: 65
Partner 67

Monthly take-home pay:

Type of employment - self employed and public sector for partner

In general are you:
(a) spending more than you earn, or
(b) saving? saving


Summary of Assets and Liabilities
800k
Living with my parents

Cash: 800k (currently on fixed term and saving accounts earning about 3%)
Partner: 130k

My parents have an additional property that they rent out, but are planning to sell soon.


Other borrowings – car loans/personal loans etc
No borrowings
Do you pay off your full credit card balance each month? yes
If not, what is the balance on your credit card?


What specific question do you have or what issues are of concern to you?


I live at home, both my parents are over 70. I am planning to buy a property with my partner.

We have two options, my family home is quite large in the countryside valued at 800000. Currently I live with my partner in the back of the house in a very small converted kitchen and bedroom although it is still connected to my main family home in which my parents live.

My parents have suggested that rather than I buy a new property elsewhere that we do some extensions and renovations to the property and improve the small living quarters for them and myself and my partner would move into the main house and do that up how we like also. Hopefully some minor extensions and renovations would mean we will not need large planning permission.

Another option is to build another property on the land which I don't know if it will get planning permission or do I just buy elsewhere.

If we can extend and renovate a back kitchen, bedroom and nice living quarters for my parents and we can plaster over the doors to effectively make a private living quarters for them. This would mean I can be close to my parents whilst still having privacy.

Also would this also mean when my parents pass, hopefully in a long time, I would not have to pay any tax on inheritance as effectively I have never bought a house elsewhere and this has always been my principal private residence, I have always lived with my parents. Is this the case? How would I avoid the inheritance tax on the family property? Would I have to stay in this property for 7 years after their passing? I could not purchase any other property even as an investment property?

They have already given me a full inheritance. The ideal I believe would be for us to live close to my parents, if we could enlarge the family property to make it fit to house 2 families effectively and give my parents a lovely private living quarters and I move into the main family home quarters and build my family there. If we could achieve all this and avoid inheritance tax on the house it would be ideal.

Thank you to all for your advice and help.
 
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You are in a great position for purchasing your 1st house. I would avoid the renovation scenario above to your parents house as it could get very complicated down the line.

Do you have any siblings? What does your partner say about the prospect of essentially living with your parents for the rest of your lives?

You would not avoid inheritance tax on your parents home when they pass just because you live there. It is their house and not yours. On the passing of the last survivor, the house will be transferred into their estate and distributed in accordance with their will. Capital Acquisitions Tax will be payable by the recipients over the thresholds. As you have already received a "full inheritance", If your parents both passed tomorrow and you are the sole beneficiary of their estate your tax bill on the house would be €264k (€800k*33% )

If you love the area, consider purchasing a house nearby so you will still be close to your parents without being on top of each other. You also need to be very mindful about purchasing a house with your partner giving your cash position. Having joint names on the property is a big risk if you are not married.
 
1. Get married before you enter into any joint financial arrangements

2. Can you clarify what you mean by

"They have already given me my inheritance"
 
Easel said:
You are in a great position for purchasing your 1st house. I would avoid the renovation scenario above to your parents house as it could get very complicated down the line.

Do you have any siblings? What does your partner say about the prospect of essentially living with your parents for the rest of your lives?

You would not avoid inheritance tax on your parents home when they pass just because you live there. It is their house and not yours. On the passing of the last survivor, the house will be transferred into their estate and distributed in accordance with their will. Capital Acquisitions Tax will be payable by the recipients over the thresholds. As you have already received a "full inheritance", If your parents both passed tomorrow and you are the sole beneficiary of their estate your tax bill on the house would be €264k (€800k*33% )

If you love the area, consider purchasing a house nearby so you will still be close to your parents without being on top of each other. You also need to be very mindful about purchasing a house with your partner giving your cash position. Having joint names on the property is a big risk if you are not married.
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If you live in the parent's house before and after their passing, you can inherit free of inheritance tax. Read up on "Dwelling house relief"

Qualifying conditions for inheritance on, or after, 25 December 2016

This page provides information regarding the inheritance of a dwelling house on, or after, 25 December 2016
www.revenue.ie www.revenue.ie
 
Easel said:
You are in a great position for purchasing your 1st house. I would avoid the renovation scenario above to your parents house as it could get very complicated down the line.

Do you have any siblings? What does your partner say about the prospect of essentially living with your parents for the rest of your lives?

You would not avoid inheritance tax on your parents home when they pass just because you live there. It is their house and not yours. On the passing of the last survivor, the house will be transferred into their estate and distributed in accordance with their will. Capital Acquisitions Tax will be payable by the recipients over the thresholds. As you have already received a "full inheritance", If your parents both passed tomorrow and you are the sole beneficiary of their estate your tax bill on the house would be €264k (€800k*33% )

If you love the area, consider purchasing a house nearby so you will still be close to your parents without being on top of each other. You also need to be very mindful about purchasing a house with your partner giving your cash position. Having joint names on the property is a big risk if you are not married.
Click to expand...
No siblings.

Why would I not inherit the house, if I have been living with my parents until their passing and living the house house after. Would it not be declared my principal private residence and thus I would pay now tax on it when it passes from my parents to me?
 
Fisoon said:
Cash: 800k (currently on fixed term and saving accounts earning about 3%)
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Fisoon said:
Yes, they have given me 335k in cash.
Click to expand...
Was the rest of the €800k accumulated from further gifts?

You and your partner have €900k in cash with the potential to borrow ~€500k as 4x income. You could pretty much buy any property you wanted.

There are a few different things that should be considered before proceeding.

Firstly, your partner shouldn't spend any of their money on renovations or extensions unless you get married first. There is too much at risk for them if your relationship ended. They could have sank €100k into their partners parents home and be left with nothing.

Secondly, you probably shouldn't spend your own money on the renovations. If the goal is to avoid inheritance taxes, it makes no sense to put money that has already been gifted to you back into your parents property. It would effectively negate the early cash gift.

Thirdly, and this is just an opinion, I don't think you should make a huge life decision based on a possible CAT saving in the future, especially when you have the means to do whatever you want.

I would first make the decision if this is where you want to live for the next 30 years. Do you actually want to live there and more importantly, does your partner?

The costs involved in making it a suitable property for both your parents and yourselves will cancel out the CAT saving. Ownership and spending money on it further complicates matters and there is a reasonable chance that at least one of your parents would still be around in 20 years.

And lastly, family dynamics can be odd at the best of times and a lot can change for you in the next 5-10 years if you start your own family. Your priority will shift to your kids and it can create tension if your parents feel neglected. If the property still belongs to them, they would have the ability to make you leave. You might think this could never happen but they are not your partners parents, just yours.
 
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