Gift versus inheritance

I'm confused about inheritance rules.

I have an apartment in Spain that's worth about 200 grand but I paid 35 grand for it in the early 90s.

I would like to gift this apartment to my son. Can this be offset against his future inheritance tax liabilities? Would this result in an immediate capital gains tax liability?
Would the capital tax liability be different if the apartment changed hands on my death instead of now ?
I am trying to be fair to all my kids and to be honest , some of them are spoiled and may contest any will in the future even though I am leaving then more than most people. Because they have different mothers unfortunately they are not as close to each other as I wanted despite my best efforts. I would like to even remove the possibility of argument by removing this apartment for example from my future estate. They will get roughly the same amount but some may waste an enormous amount of time in litigation because their mothers made it very hard for me to see them. And I tried very very hard to see them and spend time with them. I was also a workaholic and now that I'm ready to retire I'm not in the best of health.

I am not a tax expert, but this is my understanding.

Don't confuse CGT Capital Gains Tax with CAT - gift and inheritance Tax. They are separate most of the time.

Assuming you are resident in Ireland, you are liable to CGT on your assets wherever they are situated.
So if you dispose of your apartment in Spain while you are alive, you will pay CGT at 33% on the capital gain.
So if you give it to your son, you will pay 33% CGT on about €165k or €55k

You should check the tax situation in Spain. You might have a liability there, but generally speaking, if you pay taxes in Spain, you will get a credit for them in Ireland.


When you die, your capital gains expires. So if you leave it to him on your death, you or your estate will face no CGT liability.

Your son can receive gifts and inheritances from his parents up to €335k cumulatively during his life.

So if you gift him €200k now, he won't pay any CAT but will use up €200k of his €335k allowance.

Again, check with a Spanish tax consultant on any Spanish implications.

Brendan

BoredCarrot said:

I would like to even remove the possibility of argument by removing this apartment for example from my future estate.

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This is an interesting problem.

I think you should gift him the apartment now. And pay the CGT.

Don't let the tax tail wag the dog.

If it's the right thing to do, do it.

Unless you have a terminal illness and expect to die in the near future.

Brendan

BoredCarrot said:

some of them are spoiled and may contest any will in the future even though I am leaving then more than most people.

Click to expand...

It's good that you are aware of this.

Have you made a will? Have you alerted your solicitor to this possibility?

Get their advice on making it as solid as possible.

Brendan

Could you gift your son some other asset worth €200k on which you have no capital gain, e.g. cash?

Why are you gifting him this specific apartment?

Brendan

ThankYou Brendan for the time you put into the advice given.
The son I wish to gift the Spanish apartment to was born in Spain to a Spanish mother. He did very well in his life . I wish I could take credit but I am very proud of him regardless. I invited him to Ireland.8 years ago where he got a great job on his own steam and even moved here from a better position in Spain to get to know his family here . I only learned about his existence when he was in his 30s. The apartment I wish to gift him was the apartment I lived in when I met his mother who passed away. I feel sorry I was not around to help him because I was ignorant of the situation. I do not want his siblings who do not know him so well to resent the fact that he is in my eyes equal to them. In fact I feel he should get a little bit more because I paid for them to have private schools and piano lessons and everything else.

Then give him the apartment now and face the tax consequences.

The issue is much bigger than the tax treatment.

But are you sure that is where he would live if he had the cash to buy a home? It might satisfy your emotional issues, but he might want a three bed close to where he works.

And you don't have to give him the entire €200k. If you have other cash, give him that.

Brendan

I looked at this a while back. You'd really need a Spanish solicitor as there are some important variables, including what Communidad is the apartment in, and does is he tax resident in Spain.
It seems though that you, not he, could be liable to Spanish CGT based on official current value of property (Most Spanish properties have official value for tax, not market value) before transfer, whether tax resident there or not. Also new inheritance/gift rules have come in relatively recently in many provinces eg in Valencia in November 2023(rough interpretation)100k tax free, but special write down introduced of 99% of balance for spouses and children.