Buying in-laws out of family home

M

majellahayes

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Good Evening,

Myself and my husband are in the process of buying his siblings out of their family home ‘inheritance’.

We have lived with his mother for the past 15 years in her home and raised our 3 kids also there. Her will always stated he would buy the house from her for €90k and give each of his 3 siblings €30k as a form of inheritance.

We have secured a loan for that amount and now solicitor has mentioned getting property valued (hasn’t mentioned it previously )and paying Government stamp duty. So I’m looking for advice .. does this sound about right ? I feel why should we pay that and hand over the money to his siblings Scot free ?

I do know we are getting a house at a very good price but we have pumped money and minded his mother for years. She is still in very good health so she never really needed a lot of help ! But I’m just double checking all sounds right?

Any advice please
 
You are paying stamp duty as it is a tax on property purchase. The siblings are not purchasing anything. How Much Is the house worth at market value ? If purchasing below market value, you might be liable to gift/inheritance tax and the stamp duty will also be based on market value.

Also you will be gifting the siblings 30k so does this leave them liable for gift tax? Check on this as it you may need to structure thr payments to them and maybe their spouses to keep below threshold.
 
majellahayes said:
We have secured a loan for that amount and now solicitor has mentioned getting property valued (hasn’t mentioned it previously )and paying Government stamp duty. So I’m looking for advice .. does this sound about right ?
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Presumably its for the purposes of paying stamp duty, which is based on the market value, not some notional amount agreed between connected parties.
 
The owner of the house, your mother is still alive. So you will pay your mother the 90k? Then it is up to your mother to gift to your siblings. Thresholds are much higher for parent to child than between siblings. And your mother can gift you the difference between market price and 90k, on which you may or may not owe gift tax.
 
This transaction should be done as follows

1) You buy the house from your Mother in Law for €180k.
2) She does what she likes with the money. She can gift them €30k each now or leave them €30k each in her will.
3) The Stamp Duty will be on the value of the house and not the price you pay. But Stamp Duty is only 1% so if the house is worth €280k, then you will pay €2,800 rather than €1,800
4) The difference between the market value and the price you pay will be a gift to you. But his parents can gift him up to €335k without any CAT implications. (This is a lifetime limit from both parents)

I don't know the tax treatment of a gift to you of €50k and a gift to him of €50k.

Brendan
 
Her will is irrelevant if she is alive.

You are purchasing her home for 90K. Which is presumably a lot below market value.

The difference between market value and 90K is a gift from her to you both.

She is gifting 30K to 3 people.

I hope she has independent legal advice.

Basically she is giving up everything to all 4 of her children. Is this a wise decision I wonder. I'm imagine 90k would be quite beneficial to her.

On a side note, I'm in favour of children who live with their elderly parents inheriting the family home in recognition of the care they give.
 
Why do you feel his siblings are getting free money? Isn’t it their inheritance? And not their ‘inheritance’. Do you not see them as having any right?

There are 4 kids, he’s getting a bargain house, albeit one you have already invested in and they are getting €30k. How much rent has been paid over in the 15 years.

It depends on what the house is worth, if it’s worth 200k no biggie, if it’s worth 5m then it’s a big deal.

Better advice on tax etc is set out above. Sounds like your solicitor isn’t great at the tax planning advice for the family.
 
majellahayes said:
Her will always stated he would buy the house from her for €90k and give each of his 3 siblings €30k as a form of inheritance.
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So you are paying out €180k in total?
It makes no sense to do it the way you propose.
You should do it the way I suggested.

And you should get an accountant to look at the final proposal from a tax point of view.

Brendan
 
I missed that, that they pay 180K in total. I very much doubt a will states a payment of 90K by him to his mother and then he also pays 30K to the other 3 siblings, that makes no sense.

The whole thing is 'off' anyway. Because it's framed as him buying his siblings out of 'their' inheritance. Also it's nobodies business what is in the will.
 
No , buying house from his mom 90k. That’s it . Into her account and she is doing as she wishes by giving each of the kids 30k each(not us as we are getting the house ) We paid rent years go but took over all bills and maintenance of house . So now we just want it in our name. We are getting it for a great price I know bc we maintained it for 15 yrs so definitely work more. That what is in her will and her late husbands will for over 20yrs. Just queried stamp duty as her solicitor only mentioned it recently and not previously when she had spoken with him. That’s it
 
obviously when she sell the house to you, she will need to revise her will as she will no longer own the house
 
Why does your mother in law want to do this now?
 
This is riddled with risk.

1. You are assuming that her assessment of value is the basis on which to proceed - not correct. If you are buying the house you will have to do so at market value - not what she wants it to be. So it needs a valuation and a solicitor. I did this recently and got three valuations which are the record we gave to our tax person/ solicitor and they workled out value from there. Revenue will want a transparent record of what happened.

2. You need a written agreement with your mother in law that goes through hers and yours solicitor so it is legally clear hat is what she wanted to do. Otherwise you are open to challenge. Revenue will also want this.

3. Why are you not availing of Exemption for a Dwelling House? Surely its more tax effective? If it is then you can give the value you saved on not buying it to siblings - €30k each. They will have to pay tax on this though. Would have to happen after your MIL passes. In the meantime you are in scenario below (4.)....

4. Be careful that it is not seen that you have a beneficial interest in the house by Revenue - free gift- therefore you may have to be paying tax and penalties for not declaring your free gift of living there. You need to regularise this. You cant use 'bills and maintenance of the house' as a consideration against living there for free informally without agreement - Revenue see this as a gift of free use at market value. If the house was worth 10,0000 a year in rent Revenue would see you getting 10k per year x 15 years of a free gift.... I would act quickly with good legal advice to regularise your position. If you are not her carer - it does not sound like you are - then you are availing of a gift since you lived there. Maybe you should give her the value of the gift of living there for the past 15 years and do point 3 above so your position is clear and she has capital to give her children. Bear in mind if you do that you have to make a declaration to Revenue, pay penalties and she will pay tax on that income. Your husband can get up to €335k from his mother tax free, while she is alive - this could be the house but the siblings will be open to challenge this.


I would absolutely get a proper legal opinion and a tax specialists advice (not an accountant). Your solicitor sounds like they have very little experience and potentially are setting you up for bigger issues.
 
majellahayes said:
Myself and my husband are in the process of buying his siblings out of their family home ‘inheritance’.
Click to expand...

Your initial post is very confusing.

Are you proposing to buy the house today from your mother in law?

The above suggests that you are planning to give your siblings €30k each and then your MIL would leave the house to you in your will.
That would be absolutely crazy to do.

So you need to set out the steps you are planning or else we are all giving suggestions in ignorance.

Something like as follows
1) The house is worth €300k
2) We are buying it today for €90k
3) The MIL will continue to live with us
4) She will give each of her other children €30k each
5) When my MIL dies, she won't have any other assets to leave.

Brendan
 
Brendan Burgess said:
Just to be clear, you can buy it at whatever price you and your mother in law agree.

But the stamp duty and CAT if applicable will be based on the market value.



Brendan
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I'm not sure of that Brendan.... It has to be fair market price so says my tax person and my solicitor. We had to do this recently after a revenue challenge. We got three valuations and picked a middle price. Otherwise anyone can avoid tax by undervaluing.
 
Didn't you merely undermine your own position by doing this?
 
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