Gift of house from parent

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Doc4

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My mother is trying to gift a house she owns to me. It is under the €330,000 threshold so taxation isn't an issue. I'd assume that we have to use a solicitor anyway to draw up a transfer of ownership. Is this correct? If so, how much as a rough estimate will this cost?

Also, even though we're treating it as a gift, my plan is to pay my mother a 'deposit' of €30,000 along with monthly payments of €1,000 over 10 years (i.e. €30,000 + €120,000 = €150,000). The reason for this is because I'm unable to get a mortgage for the value of the house (€190,000). She's said that she's willing to accept this arrangement. Does this create any other issues I should be aware of? Thanks in advance for any help.
 
Doc4 said:
I'd assume that we have to use a solicitor anyway to draw up a transfer of ownership. Is this correct? If so, how much as a rough estimate will this cost?
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You would have to use a solicitor and you might consider using two solicitors. If there is anyone else involved, they might argue that your mother was put under undue influence by you to gift her the house.

You should make sure that your mother, on her own initiative, chooses and contacts the solicitor. She should have all her consultations witout you present. You should meet the solicitor separately for the "purchase" side of the transaction.

... my plan is to pay my mother a 'deposit' of €30,000 along with monthly payments of €1,000 over 10 years (i.e. €30,000 + €120,000 = €150,000). The reason for this is because I'm unable to get a mortgage for the value of the house (€190,000).
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This seems to me to be a purchase with a deferred payment rather than a pure gift of the house. There are no tax implications, except that the gift would be valued at the market value less any amount you are paying. I don't know if this needs to be adjusted for CAT calculation purposes. Probably not if it's below the threshold.

The legal implication might be that you have a legal obligation to pay this to your mother or her estate if she dies before the money is paid off.
 
Other issues to be aware of:

Stamp duty will be payable at 1% of the value of the house.
Assuming the house was not your mother's PPR she will be liable to capital gains tax.

I agree with Brendan on the meeting the solicitor separately.

Sybil
 
Thanks very much for both replies.

Just to clarify, if I was to purchase with a deferred payment (as detailed above), I would have to pay stamp duty of 1% (of €190,000) and my mother would have to pay capital gains tax of 25% (of €190,000). Would we not be better off treating it legally as a gift and avoid these taxes? Not that we would evade tax, but just hypothetically...
 
Gifting does not take you out of the tax net.

Stamp duty will be payable in any event. So that's a straight 1% on the market value of the house, not the amount you are paying.

It does not matter if it is a gift or a purchase. Only if it was an inheritance - i.e. when Mother dies and its bequeathed to you is the stamp duty not payable.

You both need to be separately represented.

You could put a mortgage deed in place to cover the ongoing payments? So you are buying it from her, albeit at a less than market value.

Talk to a solicitor!

mf


CGT arises if the house is not your mother's ppr - is it your mother's normal place of residence or an investment property?
 
Thanks mf.

I'll just give a few more details in case these are of importance.

My father was a builder and built the house over the course of 20 years (in his spare time). When he died, my mother obviously became owner. Myself and my partner moved into the house 5 years ago and spent a substantial amount making it liveable in (it had never been lived in prior to this) eg windows, heating, garden, driveway etc. We never paid my mother any rent as we intended buying it from the beginning. There were many delays however, involving the will, solicitors and then trying to get mortgage approval. Eventually, my partner lost her job and now we cannot get a mortgage to the value of the house.

I was under the impression that a one-off gift to the value of €330,000 can be given from a parent to a child tax-free. Is this incorrect? As stated above, it is not her normal place of residence.

I was also under the impression that I cannot pay under the market value of the house. So if this is not true, I could ask the bank what is the maximum mortgage amount they'll give me and pay this to my mother (while tax will be calculated on the market value)?

I know I really need to talk to a solicitor but I'd like to know my options before I go to one! Any help greatly appreciated.
 
I have no advice to give you on tax matters, but re the solicitors fees, when I sold a house last year, the solicitor charged me 1% of the value of the house as his fee for processing all the paperwork. It was a very simple sale, with no drama or hiccups. I don't know if a transfer of property is more or less complicated than a straight sale, given the complicated arrangement that you are going to have with your mother, but 1% seems like a good place to negociate up or down from.
 
Doc4 said:
Thanks very much for both replies.

Just to clarify, if I was to purchase with a deferred payment (as detailed above), I would have to pay stamp duty of 1% (of €190,000) and my mother would have to pay capital gains tax of 25% (of €190,000). Would we not be better off treating it legally as a gift and avoid these taxes? Not that we would evade tax, but just hypothetically...
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If there's money changing hands, and it's being put down as a "gift" to reduce tax liability, that is tax evasion - the deed is being falsified to reduce tax liabilities. A false certificate in a deed is a Revenue offence and subject to some stiff fines.

A transfer need not be for full value - a decent solicitor could draft it in such a way acknowledging the equity you've put into the house, and there can be an element of gift in it, e.g. for natural love and affection, and 150,000,

A transfer subject to a lien for unpaid purchase money (payable at 1k a month) would be the easiest way to handle the transaction in such a way that the mothers interest would be protected. That way everything's upfront, and there can be no question over tax.

Regarding tax liabilities, I believe there is consanguinity relief which might reduce stamp duty. I'd imagine when site costs, building costs, and deflators (the property was purchased a long time ago) are applied, the liability may not be that much.

Regarding fees, 1% (plus VAT, plus outlay - possibly 5-600) wouldn't be bad and is the norm, but you could probably negotiate a bit better. Separate representation would be strongly recommended.
 
as you have been living there for the last five years and presuming you don't own or part own any other house/apartment, then a gift of the house by your mother to you (but not to your partner) is ignored for CAT purposes.

You can, of course, pay your mother an amount for the house and the shortfall between the market value and what you pay is the gain.

Stamp duty at 1% on the market value will apply.

Your mother will be subject to capital gains tax at 25% on the increase in value in the house since she inherited it from your father. The fact that some of that increase was due to work done by you could complicate matters. I would presume though that the lump sum you are giving your mother will more than cover her tax liability on the transfer.
 
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