Gift of a house from parents

Mandelbrot..we are trying to make it simple but so far

they wanted to sell us the house and put a charge on it as security which we said no to as it would mean no security for us until the house was paid for in full.

So then we asked about what you suggest-we were advised-
"There may be a tax issue arising because the "loan" of the house value is to be interest free and the Revenue Commissioners will treat an interest free loan as a gift of the amount of interest that would be paid in the marketplace"

Also the MIL is still young and should be around for 20-30yrs so in fact the full amount for the house may be paid back to her before she dies- so there would be no difference in value of house and total monies given to them.

So lastly we suggested a straightforward gift of house to son and then we make them annual gifts to support them for the next 20 odd years-we are open to signing a contract to this affect but are unsure :
1- how much we can gift each year to each of them before tax occurs-we know son can gift them €3K each but can I gift them extra on top of that?

2- if there is a contract saying son will give them €3k each a year until death is that still treated as a 'gift'?



we are a young family-2 young kids and starting out on a new business so funds will be low and savings gone on house work ( if we ever sort this out) but we know and agree the parents need some sort of security but we also need to be able to make sure we can give them what we can when we have it-

I would have gone along with your suggestion expect we were told by solicitor about the implications of not paying any interest on the loan and with today % rates on mortgages that could be more than we can pay on top of payments.

I do really appreciate the advice as we are looking at this every which way to try and find a way to suit all , giving them security while making sure we dont end up paying tax we cant afford making the house not worth getting.

Sorry, but you don't seem to be getting the key point here - you can't get around this with "gifts" - the fact that you're putting it in quotation marks yourself shows that you know that they're not really gifts.

If the money is changing hands because of the transfer of the house then you can't call it a gift, that's the bottom line.

I'll try putting it another way - if his parents don't transfer you the house, will ye still be gifting them somewhere between 6 - 12k annually? If the answer is no, then I don't see how you can logically say that if they DO transfer ye the house the money you give them will be a gift.

ilean said:

they wanted to sell us the house and put a charge on it as security which we said no to as it would mean no security for us until the house was paid for in full.

So then we asked about what you suggest-we were advised-
"There may be a tax issue arising because the "loan" of the house value is to be interest free and the Revenue Commissioners will treat an interest free loan as a gift of the amount of interest that would be paid in the marketplace"

Also the MIL is still young and should be around for 20-30yrs so in fact the full amount for the house may be paid back to her before she dies- so there would be no difference in value of house and total monies given to them.

So lastly we suggested a straightforward gift of house to son and then we make them annual gifts to support them for the next 20 odd years-we are open to signing a contract to this affect but are unsure :
1- how much we can gift each year to each of them before tax occurs-we know son can gift them €3K each but can I gift them extra on top of that?

2- if there is a contract saying son will give them €3k each a year until death is that still treated as a 'gift'?

we are a young family-2 young kids and starting out on a new business so funds will be low and savings gone on house work ( if we ever sort this out) but we know and agree the parents need some sort of security but we also need to be able to make sure we can give them what we can when we have it-

I would have gone along with your suggestion expect we were told by solicitor about the implications of not paying any interest on the loan and with today % rates on mortgages that could be more than we can pay on top of payments.

I do really appreciate the advice as we are looking at this every which way to try and find a way to suit all , giving them security while making sure we dont end up paying tax we cant afford making the house not worth getting.

Click to expand...

The bold bit in particular makes me think that either you don't understand what I proposed in my first post, or else you need a better solicitor/advisor.

Under the transaction I proposed there is no "loan" - there is a straightforward transaction of one capital asset being exchanged for another - they're giving you a house on the one hand, and you're giving them an annuity of sorts on the other hand.

You and your hubby agreeing to pay (say) 8k p.a. to his parents for as long as they survive, is a capital amount that can be actuarily valued, a calculation which involves implied interest rates.

This is fundamentally different to the consideration being agreed as (say) 150k, and you not paying it immediately (because you don't have the money or access to a mortgage for it), in which case the 150k outstanding becomes a de facto loan.

The more I think about the more ways around it there probably are. If you want to get the optimum solution you need to be willing to pay for good professional advice to save you from tax exposure in the immediate and importantly the long-term.

Mandelbrot
To be honest they couldn't sell this house right now for anywhere near the valuation probably as it is in the sticks and needs work. If they were not to gift us they house then it would lay empty as we would move out to find a home somewhere else-leaving it with damp, a rood that needs redoing and all sorts happening and as such they could lose 1000s on the price and yes we could end up giving them money to get them through their old age..as any kid would so for their parents I suppose to make sure they are comfortable.

We had hoped the house and giving money issues could be dealt with as two different things-sounds simple when you have never done anything like this before but we are learn it all ain't as easy as that.

as well as that they will be waiting for any monies as we will be broke from the house renovation and repairs!

thanks again for your advice and honest comments-we have a lot to think and sort asap as the builders are only holding a slot til Wed and after that cant guarantee they can do the work this summer for us...

Mandelbrot

"The more I think about the more ways around it there probably are. If you want to get the optimum solution you need to be willing to pay for good professional advice to save you from tax exposure in the immediate and importantly the long-term."

that is the plan tomorrow as soon as we get hold of someone in the tipp/Lim area who can help

Solicitor is the FIL not ours-we dont have one!

We will suggest what you said about exchange and not making it a loan-straightforward transaction of one capital asset being exchanged for another

Again many thanks- to you and all the other posters..at least we know there are issues there to be investigated that can reduce any tax we pay and give them security