Inheritance Tax - Joint ownership with parents

D

duffer100

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I've browsed lots of threads but can't find an exact answer as to whether the following solution for getting around inheritance tax is allowable:

My parents own their own property worth approx €600k and a second property worth approximately €200k. In order to get around inheritance tax and help me with buying a house we are thinking of doing the following (example figures given)
  • Parents sell second property for €200k
  • House worth €500k is purchased (200k from them, 100k from my savings, 200k mortgage)
  • Ownership agreement splits house 3:2 in my favour.
  • After three years they sign their ownership over to me.
When my parents sign over the house to me will it be exempt from inheritance tax since I have been living there for 3 years?

Thanks
 
There is a lot of money at stake here. This is not an issue where you should be taking advice from an open internet forum. There is a large variety of excellent tax accountants who will give you advice specific to your circumstances for a reasonable fee. This is the direction I would recommend you take.
 
We are planning on doing that but wanted to get a bit of background on top of what I've read before speaking to an accountant. So any input is welcome but won't be the basis for a final decision.
 
If this is the dwelling house exemption your talking about because it's a gift you would be getting and not an inheritance apart from you living there for 3 years there is another condition to satisfy. The parent giving you the house must have had to rely on you during the 3 years due to old age or infirmity so they would have to be living in the house as well.

It appears they won't be as they have their own home (600k one). I also think the joint ownership will be a problem too.
 
Learner2015 said:
If this is the dwelling house exemption your talking about because it's a gift you would be getting and not an inheritance apart from you living there for 3 years there is another condition to satisfy. The parent giving you the house must have had to rely on you during the 3 years due to old age or infirmity so they would have to be living in the house as well.

It appears they won't be as they have their own home (600k one). I also think the joint ownership will be a problem too.
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Sorry, but this is completely wrong.

That condition only relates to the parents' home. The OP is talking about the purchase of another property. Their age is of no relevance.
 
Thanks, from reading the OP initial post I got the impression the dwelling house relief was their angle presumably so they wouldn't have to use up any of their group threshold.

I briefly read section 86 just now and it doesn't appear to cover a part ownership scenario - how will this aspect work for the OP?
 
Yes, the aim seems to be the preservation of the threshold.

The relief does cover a part ownership scenario.

The biggest obstacle is probably the banking piece, but that's workable.
 
Just to confirm we are indeed looking at the dwelling house exemption in section 86. The joint ownership situation is not explicitly mentioned in that section but is not explicitly ruled out either.

I'll talk to an accountant and find out for sure.
 
No probs with joint ownership. You can't have an interest in another property when you receive the one in question (or portion of same)...key work here is "another"
 
Duffer probably better to speak a tax advisor instead of an accountant.

I'm really interested to see how the joint ownership thing works as I thought it wasn't possible, I actually thought it had to work the way I explained it first but luckily you for you Gordon corrected me!!!

come back and let us all know the details of how it works and good luck!
 
duffer100 said:
My parents own their own property worth approx €600k and a second property worth approximately €200k. In order to get around inheritance tax and help me with buying a house we are thinking of doing the following (example figures given)
  • Parents sell second property for €200k
  • House worth €500k is purchased (200k from them, 100k from my savings, 200k mortgage)
  • Ownership agreement splits house 3:2 in my favour.
  • After three years they sign their ownership over to me.
When my parents sign over the house to me will it be exempt from inheritance tax since I have been living there for 3 years?

Thanks
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Will your parents continue to live in their own property, i.e., the house that it is proposed to purchase for €500,000 will not be their PPR?
 
Sophrosyne said:
Will your parents continue to live in their own property, i.e., the house that it is proposed to purchase for €500,000 will not be their PPR?
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Yes they will. The 500K property will be a totally new property, not the one that they currently live in. The reason that I brought up their own current house was to show that there will be a CAT problem at some point.
 
duffer100 said:
Yes they will. The 500K property will be a totally new property, not the one that they currently live in. The reason that I brought up their own current house was to show that there will be a CAT problem at some point.
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I assume your parents have considered the CGT implications.
 
The whole plan seems a bit contrived to me. Are you 100% certain that it won't fall foul of general anti-avoidance rules?

(Btw, if i had such a scheme up my sleeve, the last thing I'd be doing is putting it is on the internet for Revenue & all to see.)
 
T McGibney said:
The whole plan seems a bit contrived to me. Are you 100% certain that it won't fall foul of general anti-avoidance rules?

(Btw, if i had such a scheme up my sleeve, the last thing I'd be doing is putting it is on the internet for Revenue & all to see.)
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811?

For parents buying a property to gift it to their son/daughter?

It's basic CAT planning...811 has no relevance.
 
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