Buying House outright......advice?

J

Jsmarr

Registered User
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Looking for advice if any please.
Uncle who has his own house(no mortgage) has found another house for sale that he has always wanted, his own house is going on the market and is worth alot more than the house he wants to buy. A few relatives have pooled money together(just enough as this other house is alot cheaper than uncle house) and offered to give him the money to purchase this other house while his own house is for sale, and he can repay the money when his own house is sold.
He is not sure to accept this offer as he said he has a means tested pension and it could be affected if he buys this second house in his own name before his own house is sold, which everyone understands. So the offer now is for the relatives to buy the house in one of their own names and transfer/sell it back to uncle when he sells his own house, also the relatives do not have any houses of their own yet, so they are not first time buyers yet.
So is the above possible?
And are there any implications for the relatives as they are not a first time buyer yet?
Ps uncle has always been going on about this house for donkeys so it would be nice if it could be made possible, but not by him losing a pension for it though!
 
I think that the simplest approach is to speak to the Social Welfare Officer and explain what is proposed - that your uncle wants to trade down. I think that they will exercize disretion.

If they don't...

Check to see if it's possible that his solicitor would buy the house in trust for him. The relatives would obviously have to give the solicitor the funds to do this. I know solicitors do buy houses in trust, but I am not sure if there is a time limit on this.

If a relative buys the house and sells it on later, there will be two sets of stamp duty. How much is the new house? They would also lose the first time buyer status.

A bit messy, but set up a company to buy the house and then the company sells the house to your uncle when he is in funds. Doesn't save the double hit stamp duty, but does save the first time buyer status.

Another option would be to buy the new house with an extended closing date. Sign contracts now and pay a larger than normal deposit - maybe 20%. Agree not to close the sale for 3 months. In this market, most buyers would be delighted to have a confirmed sale in three months' time.
 
If the new house is a lot cheaper than the current one, then your uncle may still lose his pension even if he sells his current house quickly, if he is left with a large enough surplus of cash after trading down.
 

Thanks some v interesting options, also we now know that the house is both owned by uncle who has means tested pension and his wife who has state pension.
He doesn't seem to want to involve Social Welfare Officer as his wife thinks they could hinder the other options mentioned above from progressing.

The Solicitor buying in trust option could be the one we could use for him, or the buying the house with an extended closing date with a larger deposit. The house that he wants is for sale at about €200k, his own house would be worth about €500k now in this market.
If we buy the €200k house (using the solicitor buying in trust option) and when his own house is sold for about €500k, and he repays us all back the €200k for buying it for him, that leaves a profit of about €300k for uncle and his wife.
Have just looked into this and from what I now gather uncle and his wife are allowed to keep €190,500 profit of the €300k profit without it affecting his pension, that leaves €109,500 left over.
Do this mean he could lose his pension anyway as the amount he is allowed to keep is €190,500 of the €300k? Or do the fact that his wife having a state pension mean anything?

Greta said:
If the new house is a lot cheaper than the current one, then your uncle may still lose his pension even if he sells his current house quickly, if he is left with a large enough surplus of cash after trading down.
Click to expand...

Thanks have now looked into this, uncle has a means tested pension, his wife has state pension. His house is worth about €500k in the current market, the house he wants to buy that is for sale is about €200k. That would leave about €300k profit(minus fees). Having now checked, it looks like he is entitled to €190,500 of this €300k profit without it affecting his pension after selling his own house and buying cheaper house, which leaves €109,500.
Have just read about a thing called Gift Tax.
Can he offet this figure of €109,500 or more as a Gift Tax?
Otherwise as you said his pension would be no more, and there would be no point to any of it if thats the case as he wants to keep his pension!

Ps - Thought this could be simple(relatives buy it for him, uncle repays relatives when his own house is sold). If it's the case of him losing his pension cause of the amount of €300k left over he may aswell buy a dearer house and keep his pension!
 
"He doesn't seem to want to involve Social Welfare Officer as his wife thinks they could hinder the other options mentioned above from progressing."

As in, he does not want to lose his means tested pension.

Can I offer a different perspective here?

If he buys and sells, Uncle can have the house he always wanted and he has a significant lump sum over. Therefore, he can use his significant lump sum to live on, he does not need his means tested pension and when he has exhausted the lump sum, he can apply for his means tested pension again.

As regards actually buying the house, he can borrow the money from his family, buy the house in his own name and they take a mortgage on the property - assets equal liabilities.

mf
 

Thanks, have spoken to uncle and said to him it is not as simple as we all thought. Uncle wants to keep his pension, as it's a matter of principal to him, otherwise he has said he might aswell not sell his own house, forget about the house he has always wanted, or buy a dearer house (that he do not want) just to keep his pension.
Would his wife also lose her pension if they have €300k profit left from the sale of their home?
So would they both lose their pensions?
His wife has a state pension, uncle has a means tested pension.

The option of ''assets equal liabilities'' could also work. But the amount left over of €300k profit still remains,
Could uncle offset this amount using the Gift Tax allowance?
 
Based on Welfarites post it seems to me that most of the 100K out of 300K profit would need to be spent quickly in order not to be assessed as means so you uncle can still qualify for the state pension. Maybe a new car, holiday, doing up house, moving expenses.

The wife in receipt of state pension, do you mean contributory pension, as in she worked all her life and based on her PRSI payments she gets a pension, if it is this type of pension she can be a millionaire and still get the state pension.

Is the house jointly owned?

As for the scenario of relations becoming involved, in general where there's money, there's bound to be trouble. Lots of money and lots of trouble.
 
Welfarite said:
This might help with the SW aspect of buying/selling house.
Click to expand...

Thanks for this.


Thanks,

Yes his wife has a Contributary Pension, but uncle has a Non-Contributary pension.

Would his wife's pension be affected also is they are left with a €300k profit?

The house is jointly owned.

Could they use a thing called Gift Tax with the €100k out of the €300k profit so that uncle's pension wouldn't be affected?
 
There is no gift tax, where are you seeing a gift?

If the house is jointly owned then the profit is 150K each. Problem solved already. You'd want to be very very sure of the social welfare rules. I'd be writing a letter to social welfare and getting a response in writing that what your uncle proposes to do is fine by them.

As one spouse has contributory pension I'm guessing the other spouse doesn't get a full pension. I thought that if one had a contributory pension then they get an allowance for the other spouse, but I'm not up to date on those rules.

As previously stated the spouse in receipt of contributory pension can have any assets/money/profits and will still be entiteld to the contributory pension. Really when we're talking about money at this level professional advice would be well worth paying for.

Just to add, be aware that this is a web forum so advice is given freely but it is not a subsitute for professional advice.
 
I second that advice about checking out SW situation thoroughly. In fairness to SW systme, it tries to alleviate transition problems when pensioners are selling/trading down properties. They allow time, such as not assessing amounts sitting in bank accounts for a year or so. If there is excess cash after sale, that's a different matter but there are fairly generous disregards fro lump sums and you would have to ahve a fair amount of cash before pension is lost entirely.
You might want to post a supplementary query on the Welfare and Benefits forum, asking about the effects of this on the SW pensions (it's complicated when you try and answer a number of issues under one post); there are people who post there that may help.
 
Thanks yes will definitely check and confirm every avenue of the SW situation for them thoroughly.

Yes house is jointly owned, that would be perfect and definitely problem solved if uncle and wife could keep €300k profit, €150k each, without it affecting uncles pension.

If they weren't allowed to keep the €150k each, could they use Gift Tax CAT 1 option?

Was reading on the revenue website about a Gift Tax CAT 1, it say's an amount of money/assets that can be given away up to a value of just over €400k before any tax is paid on it, could that Gift Tax CAT 1 option work too?
 
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