buying house from father

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cjjackbones

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I am seeking information from an informed professional or someone who has had the same experience in the past, any help would be greatly appreciated. Ok so here is the present situation that I need info on:

Myself and my wife have lived in my family home over the past 5 years with my father, we do not own any other home. My father is the sole owner of the home and it is his principal private residence (it is his only house). It will be willed to myself and my sister with a 50/50 divide on his death. I am aiming to buy the house from my father, giving him a right of residency. The market value of the house is approximately 400,000, myself and my wife want to purchase the house from him for half the value (200,000) in order for my sister to receive her 50% share now.

I would like advice on the following:

The tax implications for my father (any CGT liable as it his principal private residence and has lived there all his life)?

The tax implications for myself and my wife (I have a full class A threshold available, however would my wife be liable to CAT under class C threshold)?

The tax implication for my father gifting my sister her 50% share that I would pay him for the house?

Would the 1% stamp duty be payable by me on the market value on the house?

Is there any other tax implication that would come into effect with the above situation?

Thanks
 
No CGT on disposal of your own PPR.

Note the right of residency might reduce the market value?



It's not totally clear to me what you intend to do:

(A) buy whole house from father for 200k, i.e. your father is effectively gifting you half the value

(B) buy half the house from your father, and your father gifts the other half to his daughter.
 
Maybe something to consider as well would be how fair deal scheme would effect you should your father require nursing home care for a few years in future.
 
Thanks all for you input!

the plan would be to buy the
Protocol said:
No CGT on disposal of your own PPR.

Note the right of residency might reduce the market value?



It's not totally clear to me what you intend to do:

(A) buy whole house from father for 200k, i.e. your father is effectively gifting you half the value

(B) buy half the house from your father, and your father gifts the other half to his daughter.
Click to expand...
Thanks for your input.
We Would buy the whole house from my father for 200k and the he would gift us half the value.

he would then pay my sister with the proceeds of the 200k.
 
Could you not just wait until you inherit the house then pay your sister her 50% of the value of the house ? It might make things a bit easier for all
 
cjjackbones said:
Thanks all for you input!

the plan would be to buy the

Thanks for your input.
We Would buy the whole house from my father for 200k and the he would gift us half the value.

he would then pay my sister with the proceeds of the 200k.
Click to expand...
Just to ask if my father had a right of residence to the house after we purchase the whole propertywould he have a share in the house still (be a third owner along with me and my wife)?
 
Before answering your questions, I want to address something else.

I'm not suggesting anything otherwise is happening here, but make sure your father has proper independent advice on this, and that it's something he wants to do, not that he feels pressured into. It's important that he has security, including a legal right of residence for life (this will cause a problem if you need a mortgage - more on that below). You haven't said if the house is your fathers only asset.
Your father will need his own solicitor to complete the transfer, but he should get advice before it gets to that stage.

Onto the questions.

The main problem with what you've outlined is your wife is a 'stranger' to your father from a tax perspective. So you jointly purchasing the house below market value sees your wife receiving a gift of 100k. Technically the value of the house, for tax purposes, is not 400k, as it's reduced due to the right of residence.

Do you have the resources to buy it yourself, and then later transfer it into joint names?

Why not buy the house from your father at full market value. Then separately he can gift both yourself and your sister 200k (or less, so that he keeps some assets for himself)?

Now, the problem with mortgage, if you need one. To draw down a mortgage, the bank will need first legal charge over the property. In circumstances like this, it would usually require your father to sign a declaration that he does not have a right of residence. So to get a mortgage, you have to remove all legal rights of your father. You can put a right of residence in place after the mortgage is drawn down, but you are leaving your father in a very vulnerable position.

In terms of the value of the property, technically the right of residence devalues the property to you. That's something to work out between you all. There is a formula for calculating it for a tax perspective, which reduces the amount of the 'gift' to your wife, but really you should try to avoid any gift being made to your wife as mentioned above.
 
Yes but the market value of the house is not 400k as your father would have a right of residence.

On transfer stamp duty is payable on market value AFAIK.

The other issue is that your sister gets €200k cash and you get €200k worth of house with your father living there. To me this is not a 50/50 split.

On the other hand your sister might say that you've had the benefit of a roof over your head for longer than she has. There is also the very small risk that your father changes his mind and doesn't will his share of the house to you.

But this is your family so you know what works best.
 
Pinoy adventure said:
Red onion what is the formula too reduce the amount of gift too the wife ?
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Summary version:

"The person who has received the property on which the right of residence is charged can claim a deduction for that right. A deduction of:
  • one-tenth of the value of the property is allowed for a right of residence
  • one-fifth of the value of the property is allowed for a right of residence, support and maintenance."

[broken link removed]
 
Autofill said:
Maybe something to consider as well would be how fair deal scheme would effect you should your father require nursing home care for a few years in future.
Click to expand...

A very important point indeed. 5 years is how long it would have a bearing on things. A lot can happen in 5 years when it comes to health issues as Covid has shown us all.

Income and assets
Income includes any earnings, pension income, social welfare benefits or allowances, rental income, income from holding an office or directorship, income from fees, commissions, dividends or interest, or any income which you have deprived yourself of in the 5 years leading up to your application.

An asset is any material property or wealth, including property or wealth outside of the State. Assets are divided into two distinct categories, namely cash assets and relevant assets.

Cash assets include savings, stocks, shares and securities. Relevant assets include all forms of property other than cash assets, for example a person’s principal residence or land. In both cases, the assessment will also look at assets that you have deprived yourself of since applying for State support or in the 5 years before the application.
 
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