Gift a house to a child

S

sidzer

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Hi all,

Just seeking some opinions / ideas / clarity here please.

Our two children received money from a car accident for personal injuries.

Child 1: Just gone 18 years old got €70k - she is due to get this money this week.
Child 2: 16 years old got €130K - will get the money when she is 18.


We have some worries how they will spend the money. Child 2 in particular is very good at spending any money she gets for birthdays etc. Child 1 is going to college next year and will no doubt want to do what most students do but will have more money than most to do it.

We have 4 houses including the one we live in. I have an idea to give / gift a house to each if they pay us the money they have got from the accident.

We have a 3 bed semi in Dundalk - probably worth @ €250K
We have a 3 bed apartment in Dublin - probably worth @€400K

The houses are fully paid for - and we currently rent these out and are paying @ half of the rent in taxes etc. We both work so we can afford to give over the houses. The children could collect the rent and in future they have a house to use or sell etc. Most importantly - they won't have a large sum of money to squander!

Would this be a straight forward signing over? Or is it a lot more complicated? The solicitor seemed to sense that it would not be a good idea - not sure why - he advised us to seek financial advice.

Any opinions would be most welcome.
 
jpd said:
Well, if you gift the house to the 18 year old, she could just sell it and pocket the cash - there is not much you could do to stop her, as she is over 18

I think you need to sit down with them and treat them as adults, ok young adults, and have a proper conversation
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Yes - but she would be getting a monthly rent payment of @ €1000 so won't be stuck.

And selling a house is not a straight forward
 
sidzer said:
Would this be a straight forward signing over? Or is it a lot more complicated? The solicitor seemed to sense that it would not be a good idea - not sure why - he advised us to seek financial advice.
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You would need a solicitor to deal with the transfer of the property from parents to child.
You would be liable for CGT as if you had sold it at the fair market value.
Your child should be exempt from gift tax by using up most or all of their Capital Acquisitions Tax group A exemption (€400K) but that means that they will not have it for any eventual inheritance from you.
The child would presumably lose their first time buyer status going forward which may or may not be a concern.
They would also be assessable for income tax etc. on the rental income assuming it's not their PPR and availing of the rent a room scheme.
This income may also impact eligibility for SUSI grant support.
There are probably other financial and non-financial implications but these are a few obvious ones.
To be fair to your solicitor their job in all this would mainly be the conveyancing and they're not responsible for giving overarching financial and tax advice.
If you don't trust your adult child with €70K then it seems a bit odd to me to trust them with the gift of a €400K rental property.
 
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sidzer said:
The children could collect the rent and in future they have a house to use or sell etc. Most importantly - they won't have a large sum of money to squander!
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sidzer said:
I have an idea to give / gift a house to each if they pay us the money they have got from the accident.
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sidzer said:
Child 1 is going to college next year and will no doubt want to do what most students do but will have more money than most to do it.
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Do I understand this correctly?

You are proposing to sell an 18 year old a house worth €250k for €70k because they are not very good with money?

Let them blow the €70k and learn their lesson.

Brendan
 
Giving children houses is a terrible idea. There was an article about a mess a couple got into through their loose arrangement on a property they gave their son in The Irish Times today.

But back to your situation and why it is a bad idea:
  1. We spend years rearing our children with the ultimate goal of them being independent. Gifting them a house is not teaching them how to be independent. A house is the biggest purchase most people make. It requires saving, budgeting and going without to get the money to buy it.
  2. Young people have to learn the responsibility of working for their money and budgeting on their low wages. You are just giving them a rented property and €1,000 a month that goes with it.
  3. If they are bad with money, they will also have to do their own tax returns, learn about tax deductible expenses, realise that not all that money is theirs, some of it has to go on taxes and repairs. Too much too soon, let them budget on a salary from working in retail.
  4. They will lose their first time buyer status.
  5. They may not want to live there, they may want to move elsewhere.
Then there is the rationale that you think that they might spend their compensation so you are going to give them a house?!!! Stick it in fixed term account or an investment bond with a life company with early exit penalties and tell them the money is for their future. If it is in an account that they don't have sight of, they will probably just leave it until they are older.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Steven Barrett said:
Stick it in fixed term account or an investment bond with a life company with early exit penalties and tell them the money is for their future. If it is in an account that they don't have sight of, they will probably just leave it until they are older.
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I fully agree with your post other than this. They're 18 and, as such, at least technically an adult and entitled to do what they want with their own money (assuming there are no restrictions attaching to the compensation payment). By all means the parents should offer their advice and opinions but, as far as I can see they cannot and should not dictate. At least not in relation to the 18 year old's €70K.
 
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