Discussion:Property over a million but low income..!?

[truthseeker]

It will roll up but she doesn't care - it will only affect things when the house is sold, probably after she dies. The only people who 'lose' are those inheriting and they don't care either.

So you are happy enough that in the future there might be situations where the inheritors of family homes may have to sell them to pay off the outstanding taxes.

I wonder what will happen if properties are worth less than the tax owed. Im thinking of a situation where the tax rolls up for a few decades and then something happens to the property like a fire, rendering it very low value.

 

[mandelbrot]

So you are happy enough that in the future there might be situations where the inheritors of family homes may have to sell them to pay off the outstanding taxes.

What's wrong with that? It's not the inheritors that have to sell it, it's the executors, as its a tax owed by the estate.

I wonder what will happen if properties are worth less than the tax owed. Im thinking of a situation where the tax rolls up for a few decades and then something happens to the property like a fire, rendering it very low value.

Surely it'll come out of the estate and the residue is distributed.

 

[truthseeker]

What's wrong with that? It's not the inheritors that have to sell it, it's the executors, as its a tax owed by the estate.

Theres really nothing I can say to you if you think that that is fine. Its a fundamentally different viewpoint. I dont think its fine. Our society seems to be getting colder and more indifferent.

Surely it'll come out of the estate and the residue is distributed.

What if there isnt enough? If the taxes have rolled up over years and then the property somehow loses value, then how are they to pay the rolled up taxes - if the only estate is the property?

 

[Bronco Lane]

Surely it'll come out of the estate and the residue is distributed.

So outstanding taxes are paid off and the residue distributed?

Am I right in saying that if a house worth say €900k is left to 3 children then each gets €300k. The inheritance tax free threshold is €225k, so each pays inheritance tax on the remaining €75k.

If a house is worth €900k and is left to 3 children but has outstanding property tax of say €30k then €870k is distributed amongst the 3 children with each receiving €290k each. So each pays inheritance tax on the remaining €65k and not €75k?

Incidentally I agree with truthseeker on his point made.

Seems like a way for someone to reduce an inheritance tax bill. Am I right on this?

 

[Bronco Lane]

What's wrong with that? It's not the inheritors that have to sell it, it's the executors, as its a tax owed by the estate.

The executor is acting on behalf of the deceased but to suggest that the inheritors are all waiting with baited breath to see what they get while the executor fiddles about is a bit simplistic.

Lots of parents involve their children when making their wills and lots of inheritors have an input in to how their parents estate should be distributed.

 

[mandelbrot]

Theres really nothing I can say to you if you think that that is fine. Its a fundamentally different viewpoint. I dont think its fine. Our society seems to be getting colder and more indifferent.

yeah I'd say we'll have to agree to differ on this one - it'd be boring if we all agreed my view of inheritances is that no-one is "entitled" to an inheritance, indeed my Dad has often told us not to be expecting one, that he plans to spend whatever he has, and I think he's dead right - he's worked all his life for what little he has, and I don't see why we have any divine right to an inheritance. A parent's job IMHO is to give their kids a good start in life so that they can make their own way, not to leave them a pot of gold. In fact it's funny you think society is colder and more indifferent, I see society as being more geared towards "entitlement".

But the issue as I see it here is more to do with personal responsibility - you seem to think that a particular class of property owners should be let off the hook just because they can defer indefinitely, and I don't see why that should be the case, when plenty of other people will struggle along and pay the tax as it falls due...

What if there isnt enough? If the taxes have rolled up over years and then the property somehow loses value, then how are they to pay the rolled up taxes - if the only estate is the property?

"They" are dead, the tax is payable out of the estate, if the estate is insufficient then the State loses out.

 

[truthseeker]

But the issue as I see it here is more to do with personal responsibility - you seem to think that a particular class of property owners should be let off the hook just because they can defer indefinitely, and I don't see why that should be the case, when plenty of other people will struggle along and pay the tax as it falls due...

Thats not what I think at all but feel free to reinvent my thoughts. I think its a terrible shame if family homes that have been in families for generations cannot be passed along because of taxes.

 

[Bronco Lane]

But the issue as I see it here is more to do with personal responsibility - you seem to think that a particular class of property owners should be let off the hook just because they can defer indefinitely, and I don't see why that should be the case, when plenty of other people will struggle along and pay the tax as it falls due...

Those who have to defer will be on an joint income of less than circa €25k. They aren't being let off the hook. Nothing to do with personal responsibility. It has to do with income. They will also pay 4% interest on tax owed.

 

[Mrmr]

Between the fair deal, deferred LPT and inheritance tax it looks like the state will have the majority of everything a person has worked for returned to them. Quite the communists, aren't we ?

 

[mandelbrot]

Thats not what I think at all but feel free to reinvent my thoughts. I think its a terrible shame if family homes that have been in families for generations cannot be passed along because of taxes.

Touchy! I did say "you seem to think"...

Can you explain what you do think should happen so, to avoid the terrible shame you describe above?

I think if it comes to the property having to be sold outside the family against the wishes of the family, the prospective inheritors should blame their parent(s) for not paying the tax and allowing that situation to develop, or not asking for their help to deal with the issue, or themselves for not acting in the previous decades to ensure it wouldn't come about (we are talking about family here, unless your perception of coldness & indifference extends to families too).

If everyone was so concerned about South Fork not having to be sold to outsiders, then they had decades to make sure the situation wouldn't arise.

Just to try to bring some perspective to this - take a house worth 400k, assume LPT at 0.18% p.a. plus 4% interest, for 20 years (ignoring inflation or any change in value) - this results in a liability of just over 22k. God forbid my Dad died in the morning and left me €400k worth of house after him not paying LPT for 20 years, I think I'd be willing to deal with that tax consequence.

 

[truthseeker]

Can you explain what you do think should happen so, to avoid the terrible shame you describe above?

I think that some provision should be made for an inability to pay, not just mounting debt with interest to be taken from an estate upon death.

My father in law cant afford this tax. We have all told him we dont care about the property, the estate etc... But he feels like a failure that he cannot get this sorted while he is alive, he has no choice but to defer. There are many people like him.

What about young people who are already in financial difficulty, mortgage arrears, debt etc.... How is more debt going to help them?

Perhaps you are in a comfortable financial position and dont have these kinds of real life worries, but plenty of people do and its not nice for them.

As Bronco Lane has pointed out, its not about personal responsibility, its about income.

 

[Dermot]

My family just worked in very ordinary jobs but if we saw that our Father or Mother needed money for some thing that was necessary we would club together and sort it out

 

[mandelbrot]

I think that some provision should be made for an inability to pay, not just mounting debt with interest to be taken from an estate upon death.

My father in law cant afford this tax. We have all told him we dont care about the property, the estate etc... But he feels like a failure that he cannot get this sorted while he is alive, he has no choice but to defer. There are many people like him.

What about young people who are already in financial difficulty, mortgage arrears, debt etc.... How is more debt going to help them?

Perhaps you are in a comfortable financial position and dont have these kinds of real life worries, but plenty of people do and its not nice for them.

As Bronco Lane has pointed out, its not about personal responsibility, its about income.

And if there is insufficient income, then it can be deferred - it's a tax charged on the value of an asset at the end of the day.

It's the people in negative equity I have sympathy for, since they don't actually have an asset, but a millstone around their necks.

People with free and clear ownership of a valuable asset have plenty of choice, and the ability to defer - it's then up to the benificiaries of their estate to decide what they want to do about the accrued tax.

EDIT: And just to reiterate a quite simple fact - if the LPT is deferred for 20 years, at current rates, the liability including interest would run to somewhere around 5 - 6% of the property value (assuming static prices).

 

[mandelbrot]

Perhaps you are in a comfortable financial position and dont have these kinds of real life worries, but plenty of people do and its not nice for them.

Yeah, I'm so comfortable that I can't afford to buy a house even at today's prices For someone who took such exception to me inferring what I thought you meant a few posts ago, you're quick enough to leap to conclusions about my finances based on nothing at all.

 

[truthseeker]

My family just worked in very ordinary jobs but if we saw that our Father or Mother needed money for some thing that was necessary we would club together and sort it out

So would we but 8 redundancies between 5 people in the past 3 years has left no one in much of a position to help out - we already help him out financially for food, medicine, physio etc....

 

[Tintagel]

It's not the inheritors that have to sell it, it's the executors, as its a tax owed by the estate.

" it's then up to the benificiaries of their estate to decide what they want to do about the accrued tax."

Which is it?

 

[mandelbrot]

Which is it?

I was wondering if anyone would pull me on that! - all I know is the LPT is a charge on the property and has to be discharged when the property is sold/transferred. I don't know enough about succession to figure that out, but does it really make much difference?

 

[SarahMc]

Thats not what I think at all but feel free to reinvent my thoughts. I think its a terrible shame if family homes that have been in families for generations cannot be passed along because of taxes.

I don't know of any home that has been in a family for generations. Well maybe farms, but not in urban areas.

I really don't think deferral of the property tax will lead to houses not being passed along. I think that's a red herrring tbh. I understand where your dad is coming from, it's like the need to have enough to bury themselves. It's a huge fear of debt and the shame of debt that that generation had. Certainly my own parents did. But I don't think we can legislate for that, it would be too problematic.

 

[truthseeker]

I don't know of any home that has been in a family for generations. Well maybe farms, but not in urban areas.

I know a few, not many, but a few.

I really don't think deferral of the property tax will lead to houses not being passed along.

Well its more likely that people wont qualify for deferral and will either have to sell their home or get a loan to pay it. The deferral criteria is quite low - for example the opening post of this thread - the lady in question wouldnt qualify for deferral. I havent seen a reasonable answer to her problem (or that of other posters with a similar problem) yet on this thread.

I agree we cannot legislate for fear and shame of debt, but it might help if the government could design a fair tax based on ability to pay.

 

[dereko1969]

The OP in this case may qualify for a partial deferral.

Or she could pay €34 euro per week out of her gross income which is €480 a week, I hardly think this should be a huge difficulty.

This reminds me of the numpties who were defending that millionaire couple who were being evicted from their house in Killiney.

The OP has no mortgage and a very significant income, what is she doing with all that money that she can't afford €34 a week? There are plenty of other people more deserving of sympathy than this case.