Should we buy a second house and let it to our son who is renting?

Does your son have a legal separation in place, or just separated from his estranged wife?
What are his housing needs ? Ie does he need 2 or 3 bed property?
You mention that he is paying the mortgage, is this in part or in full? What is the plan around this? Has there been agreement around this in court?

Your son has a lot of things to settle first. Id recommend letting that play out first. Dont make huge financial decisions now, until that has all run its course. It could end up he buys out the estranged spouse (or vice versa).
It could take a few years to sort through everything. You've offered him a place to live within your own home, thats more than enough for now. Do not wrap up your own financial future in this situation. Take him out of the equation and ask yourself do you really want to be a landlord at this age, and take on all the considerations that go with that?

I think your intentions are good but for everyones sake, Id recommend sitting tight.
 
ClubMan said:
Any transaction structured mainly or solely to avoid tax could be looked into and vetoed by Revenue. I know that much. Anyway I did qualify my comment.

Whatever about being a fishmonger there's definitely something fishy about being so confident that Revenue might not look in more detail at a case like this.
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The transaction is letting the son live in the property!

You’re quoting a half-baked version of Section 811, i.e. general anti-avoidance.

That would only be relevant if the parents were letting him live in the property just to avoid tax or because it created some contrived upside for them.

Caretaker discounts are a commercial issue rather than a tax one; they are accepted by Revenue in cases like this because letting a relative stay in an otherwise empty property has commercial upside for the owner.

Plus, the tenant doesn’t get special landlord/tenant treatment; that has a monetary value.
 
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Leper said:
Separation and Divorce are not the same thing. If the divorce is to be contested it can get very dirty and few can predict what will happen in settlement.
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There's little difference in this country between a judicial separation and divorce.

A divorce only adds the right to re-marry.

Divorce cannot be contested; provided the conditions are met (the couple are legally married, have lived apart for two years and cannot be reconciled), a divorce will be granted.

Having said that; it would not be prudent for this man to acquire new assets until the settlement terms of his JS or divorce are agreed.
 
MrEarl said:
Is there even the slightest chance that his ex, might come back and try to get a share of this new property, through the court system?
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The property will be owned by his parents.....how could his ex wife claim a share of this property?
Thirsty said:
Having said that; it would not be prudent for this man to acquire new assets until the settlement terms of his JS or divorce are agreed.
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What new assets will the son be acquiring?
 
SlugBreath said:
We would still have about €200k in savings plus a small private pension and state pensions to see us through. We live frugally but enjoy our holidays.
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Agree with Gordon.

To me, it's clear that you should buy the property and allow your son to live in it.

Take advice from his lawyer about the best way to structure this.

That advice may well be not to do this until the separation and divorce is finalised.

Or maybe do it now and charge him the full market rent which you could waive after the divorce is settled.

Make sure that whatever you do is all written down and your other two children fully understand it.





Brendan
 
The alternative which is worth considering is that you give him a formal legal mortgage of €400k to buy the house.

If you don't charge interest, the BIK would be €4,000 a year so - effectively tax-free.

Any increase in value would be free of CGT.

And when you die, it will be very easy to sort out the estate.

Assets: Family home: €500k + loan to son: €400k = €900k
Divided equally : each child gets €300k
Son pays €100k to the estate.
Family home is sold and the other children get €300k each.

In the divorce proceedings, he will have a house worth €400k and a mortgage of €400k, so I don't think that would affect matters too much. Having said that, take legal advice before doing anything.

Other advantages of this
If your son's finances improve he can start paying down the mortgage.

Or he may be able to switch the mortgage entirely from you to another lender.

Or

Brendan
 
Thirsty said:
I don't understand your question.
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The original poster mooted the possibility of the son taking possession/acquiring the house after marriage issues have been sorted out. Some posters are addressing the issue of the risks inherent in him acquiring the property before this happens which is irrelevant.
 
If you could tolerate it -
Let him move in with you, try not to die for 3 years and tell him he has to live there for 6 years after he inherits the family home to take advantage of the Dwelling House Exemption.
I don't like scenarios where family homes are sold to avoid 1 child getting a hefty revenue bill.
That's my tuppence
 
SlugBreath said:
We have cash sitting in various NTMA bonds and certificates plus some monies sitting in Prize Bonds. Earning very little and winning nothing.

We were thinking of buying a second home for about €400k here in Dublin, if we can find one. It would be for our son who is separated from his wife to live in.

He would have difficulty getting a mortgage for himself at the moment and is paying serious money in rent for an apartment plus paying the mortgage on his original home where his ex now lives.

We may or may not charge him a rent to live in this house.

Is this a good idea. (to buy house).

Should we charge him a rent (not needed) and if we don't will he be charged some sort of benefit in kind tax?

Our savings would be dramatically reduced.....but we don't need a lot of money to live off. We are just turning 70 years old ourselves.
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Just a thought, if the house is in your name it will be taken in to account should you go in to a nursing home + your own home.
I am no expert on this, you need to look further
 
MrCat said:
Let him move in with you, try not to die for 3 years and tell him he has to live there for 6 years after he inherits the family home to take advantage of the Dwelling House Exemption.
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Does a person have to live in the house for 6 years after inheritance to avoid paying Inheritance Tax?

In the above case I think there are two other siblings involved. Does this mean that they would have to wait 6 years before they get their inheritance, when the house would eventually be sold? So, one sibling won't have to pay the inheritance tax but the other two have to wait 6 years for their inheritance and also have to pay inheritance tax on their share?
 
I am not an expert on either tax or property values but I would have the following concerns:

1. You would like to help your son out with financial assistance but are your other two children happy with this arrangement - I know you can give your money to whoever you wish but it can cause family hassle - €6K a year over a few years can mount up and the others may feel they are loosing out and he is getting special treatment from you.
2. If you buy the house you will have to pay property tax etc., and if you receive rent you will have to pay tax on that.
3. If you buy the house and either of you have to go to a nursing home it will be taken into consideration under the Fair Deal Scheme.

To avoid family grievances I would suggest you discuss the matter with all the family before making any definite decision. Good luck .
 
Another point outside the financial ones is how will this affect your son moving forward with his life after divorce.
Let's say 2 years from now he meets someone new decides to move on, maybe even move out of house. Do you want to be a landlord?
Does having this house and the arrangement actually limit him looking at options to move his life forward?

What if he wants to change job, city, etc.

I know too many people who have put their lives on hold for an inheritance, only for the benefit to come long after their best years.

My vote is help him with the rent, then he can move on with his life.
 
sonandheir said:
Another point outside the financial ones is how will this affect your son moving forward with his life after divorce.
Let's say 2 years from now he meets someone new decides to move on, maybe even move out of house. Do you want to be a landlord?
Does having this house and the arrangement actually limit him looking at options to move his life forward?

What if he wants to change job, city, etc.

I know too many people who have put their lives on hold for an inheritance, only for the benefit to come long after their best years.

My vote is help him with the rent, then he can move on with his life.
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I agree with the above - it's far too soon to be making these types of decisions that have long ranging consequences. The dust needs to settle with the current situation first.
Having gone through a divorce myself, it's next to impossible to know how things will pan out.

You need to separate out these actions and consider if you actually want to become a landlord at your age and with what goes with that . Personally I think you'd be taking on a huge burden and huge risk as the situation is still in flux.

Help him out by all means or wait til the divorce / legal separation is finalized and gift him some money to help with purchase a property of his choice if he's ready to do that. It would be much cleaner and ultimately your son has control of his destiny.

Until everything is settled with divorce/ legal separation, nothing is settled. I'd say let that process come to a conclusion and then consider options and get independent legal and tax advice.
 
One thing strikes me from this thread. Getting married is expensive. Getting divorced is far more expensive. I think that we always try to help our kids at any age and at any stage. Op I hope you have gotten enough good advice to make your decision and I hope your other children understand that sometimes in life we don't need to be treated equally to be treated fairly.
 
misemoi said:
I hope your other children understand that sometimes in life we don't need to be treated equally to be treated fairly.
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People's idea of what is fair will vary widely in any situation like this. Influence can be, and is frequently, used to change someone's view of fairness in these cases. Equal treatment is more straight forward and less likely to lead to ill feeling.

The OP is trying to give the son the help he needs now while treating the children equally over the long term, from what I can see.
 
Thank you all for your insights.

We have never wanted to become landlords. We had the opportunity when we were in our 30's to invest in property. We had good funds and access to borrowings. We decided not to. (possibly a mistake in hindsight). We decided to invest in our family home instead. We now own a house in a nice location worth about €1.5m. So each of our children will inherit a decent amount when the time comes, including our son that we want to help now. He would have enough of an inheritance to pay back what he gets now, to his siblings.

Our initial plan was not to purchase a house in our name for his use. He would have been able to borrow between €250k and €300k in his own right. Our plan was to loan him €100k that he would repay to us over whatever amount of time and an amount that would suit him. If there was still a shortfall we could gift him the rest. House prices are shooting up, we thought that it might be a good idea to buy now in our names and then he could buy it back from us when he finally gets a divorce. This is taking longer than expected.

sonandheir said:
Let's say 2 years from now he meets someone new decides to move on, maybe even move out of house. Do you want to be a landlord?
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Absolutely not. We would sell the house immediately. We don't want to own a second property. We even dismissed the idea of buying a second home in the sun.
sonandheir said:
My vote is help him with the rent, then he can move on with his life.
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He needs to live in a house with a garden. He has children. The house his ex is living in now has a beautiful garden put in place by him.
 
SlugBreath said:
Our plan was to loan him €100k that he would repay to us over whatever amount of time and an amount that would suit him.
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This is clearly the best plan. Lend him what he needs to buy a house.
  • That is an easy transaction to set up
  • It is an easy transaction to unwind - he just repays you the money
    • in monthly instalments
    • by "switching" to another lender
    • if he sells the property
    • out of his inheritance
  • You are not a landlord with all the headaches and compliance that involves
  • The tax consequences are favourable - any increase in value accrues to him free of CGT
  • It's easy to adjust your will to account for it - his debt to you is part of the estate
Make sure that there is a proper legally binding mortgage on the property so that no one else can claim it.
 
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Brendan Burgess said:
This is clearly the best plan. Lend him what he needs to buy a house.
  • That is an easy transaction to set up
  • It is an easy transaction to unwind - he just repays you the money
    • in monthly instalments
    • by "switching" to another lender
    • if he sells the property
    • out of his inheritance
  • You are not a landlord with all the headaches and compliance that involves
  • The tax consequences are favourable - any increase in value accrues to him free of CGT
  • It's easy to adjust your will to account for it - his debt to you is part of the estate
Make sure that there is a proper legally binding mortgage on the property so that no one else can claim it.
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I can't dispute any of Herr Burgess' post. It appears workable and family "friendly."

But, you don't know if you or Mrs SlugBreath will die first (I know, I'm all cheer!). Let's say (for the sake of the thread) Mrs SlugBreath outlives you. You may have no input into what she will leave and to whom (Only saying and no offence is meant). I suggest you round up all your family and openly agree on what you are doing and get it all down on paper and I suggest you employ a solicitor who specialises on the matter to finalise the situation.

[Apologies for unintended negativity, but I've seen too many "friendly" family arrangements go sour after the death of parents].
 
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