Gift to Parents

Hi,

I am considering purchasing my Parents' house mainly to alleviate some financial stress on them.
Their house is worth approximately €250k. They have a loan of €35k. I intend to give them 50k followed by 10 instalments of 20k per annum.
I would like to understand if there is any tax implications. I have tried looking on Revenue website but it isn't completely clear whether this scenario would generate a tax liability for my parents.
I have a business in the UK and my parents house is in Ireland.

Thanks for any advice.

M

The house is worth €250k and you are paying €250k by installments. Where is the gift?

They on the other hand are giving you an interest free loan but the notional interest would be under the €3k small gift exemption so no issue there.

You will have stamp duty to pay on the purchase of the house.

You make good points, Joe. It's not actually a gift. More an agreement. I hadn't intended on taking ownership of the property. Instead they will make me benefactor in their will.
I was wondering whether my payments to them would be liable for tax in this scenario?

Will you be the legal owner of the house, with the provisio that they can live there for life?

None of this makes any sense. If you pay now and don't get ownership and whatever happens, you could lose everything.

Why don't you start with, what financial problems your parents have. If it's the 35K loan, could you loan them that and then could they pay you back at a zero interest rate with low repayments?

Do you have siblings.

I hadn't intended on transferring legal ownership. I had intended on leaving it in their names and they would change their will so that i was sole benefactor instead of Joint with my 4 siblings. I had assumed this would provide me with the appropriate legal protection.

I hadn't intended on transferring ownership, instead they would change their will. And yes they will live in the house for the rest of their lives.

mrcontractor said:

I hadn't intended on transferring ownership, instead they would change their will. And yes they will live in the house for the rest of their lives.

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Well if you don't transfer the legal ownership logic suggests you haven't in fact bought the house from them, and as other posters have been at pains to point out, with the best will (pardon the pun) in the world, you have no guarantees that the house will be left to you.

All of which means that as you are proposing it, you'll be gifting your parents €250k over the next 10 years, and there will be tax consequences.

If they transfer ownership to you, subject to a right of residence for as long as either of them survive, then that is something that has a value (not quite the full market value of the house, as the right of residence is a burden against your title).

This achieves 2 important objectives; firstly it gives you the security/protection that you need in handing over the money, and secondly it means that the money is not being given as a gift, as you are receiving valuable consideration.

Get proper professional advice.

You could lend them the money .. and if they are prepared to put it in writing then you would have a valid claim ..on the estate

mrcontractor said:

I hadn't intended on transferring legal ownership. I had intended on leaving it in their names and they would change their will so that i was sole benefactor instead of Joint with my 4 siblings.

Click to expand...

Oh dear, 4 siblings, what do they think of your idea, it's technically none of their business, but families !

Why do you want the house, what is the benefit for you?

I think what the OP is trying to explain here is that there is an arrangement at play.

The OP will "gift" his parents 50K + 20K (X10 years), total 250K

At the same time the parents will make the OP sole beneficiary of the family home so
that he will eventually get his money back down the road.

I think there are a number of pitfalls with this :

1) Possible exposure to gift tax (this is unlikely given the thresholds)
2) Possible problems with Siblings after parents death (very likely)
3) The OP is a bit exposed to the Parents changing their wills later etc etc
disputes arising over valuations interest payable etc etc.
4) What happens if OP is able to make the payments for a couple of years but then his circumstances change and he cant make further payments.

I think a better way of structuring this would be for the OP to get all his siblings in the loop (if possible)

and then to loan the money to his parents and for him to take a mortgage / charge on their property making provision that the loan and reasonable interest is repaid to the OP at the time of his parents death, out of the proceeds of the house sale.