Parents want to sign over their home to their son to avoid Fair Deal Scheme

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sinmcg

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Hi my husband is an only child and his parents are going to sign over their house to him. Is there any tax benefit in doing this?
 
What is the value of the house?

There is no real extra value in signing it over now rather than later

He may have to pay CAT depending on the value and prior gifts

What happens if they need funds later in their life for medical procedures or nursing?
 
Hi thanks for your reply.
The value is approx 500,000
No prior gifts have been given and his parents have little savings.
The thinking behind it is to reduce tax liability, eg fair deal scheme if either parent needs to go into a nursing home.
 
sinmcg said:
The thinking behind it is to reduce tax liability, eg fair deal scheme if either parent needs to go into a nursing home.
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The Fair Deal Scheme and tax liabilities are unrelated issues.

Fair Deal Scheme

People who move into registered nursing homes may receive financial support from the HSE under the Nursing Homes Support Scheme, also known as the Fair Deal scheme.
www.citizensinformation.ie www.citizensinformation.ie
They need to also bear the following in mind.
Transferred assets
The assessment will look at assets that you have transferred (for example any land, money or property you have given to another person) since applying for State support or in the 5 years before the application.
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I know they are separate, I’m just trying to find out if there are any benefits to having the house transferred now. Thanks
 
sinmcg said:
I know they are separate, I’m just trying to find out if there are any benefits to having the house transferred now. Thanks
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It depends on a lot more detail than you have posted.
The overall financial circumstances of all parties for example.
 
From a Fair Deal perspective, if you are confident that a nursing home will not be needed for 5 years, then potentially yes. From a tax perspective, more information is needed.
 
sinmcg said:
They bought it in 1972. It’s worth about 500,000. It is their PPR.
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Assuming that they have not already gifted their only son anything previously then €335k of the value would be exempt from CAT. The balance would be subject to CAT at 33% (i.e. €165k @ 33% = c. €55k).

CAT groups and group thresholds

This page explains thresholds, rates and aggregation rules for calculating Capital Acquisitions Tax
www.revenue.ie www.revenue.ie
 
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There’s not much more to it than that. They have limited savings and have never gifted anything before.
ClubMan said:
Assuming that they have not already gifted their only son anything previously then €335k of the value would be exempt from CAT. The balance would be subject to CAT at 33% (i.e. c. €55k).

CAT groups and group thresholds

This page explains thresholds, rates and aggregation rules for calculating Capital Acquisitions Tax
www.revenue.ie www.revenue.ie
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Would we have to pay CAT when the property is signed over or when we eventually sell?
 
sinmcg said:
There’s not much more to it than that. They have limited savings and have never gifted anything before.

Would we have to pay CAT when the property is signed over or when we eventually sell?
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The former.

How and when do you pay and file?

This page tells the reader when and how to play their CAT
www.revenue.ie www.revenue.ie
The eventual sale may be assessable for CGT depending on what happens next.
 
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The parents would be very stupid to sign over their only asset to their child.

Lots of things can go wrong:
The parents need money and no longer have an asset they can get a life loan based on.
Parents and children fall out.
The child divorces his wife and the wife claims half his assets.
The child dies, and the wife kicks the parents out of their former home.

They might all have a low probability of happening, but the consequences are huge.
 
sinmcg said:
Hi my husband is an only child and his parents are going to sign over their house to him. Is there any tax benefit in doing this?
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The tax benefit is that he gets the value of the house now, which will presumably be lower than in the future, so there will be a lower tax bill for him. The risk is that the tax and thresholds will be different in the future and he will pay more tax now than in the future. The threshold is expected to increase next year so I would hold off until the Budget on 1 October before making any firm decisions. He will obviously also benefit from not having to give Social Welfare a percentage of the value of the home as part payment for the cost of their care.

The big risk...and it is a massive risk, is that either parent goes into a home in the next 5 years and the value of the house that has now been transferred is included in their assessment for the Fair Deal. You haven't disclosed either parents age or health...and even so, a lot of elderly people can go downhill very fast and go from being independent to requiring care.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
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