Key Post To gift or to will ?

T

Taliesen

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I would like to ask those in the know here about the benefits (or lack thereof), taxation wise, of gifting versus inheriting.

An estate worth approx €1.3m split between 4 children are the figures in question. The €1.3m is split 75% land & house, 25% money. no mortgages are owing on the property.

The children have all agreed that the land is not to be sold, but leased instead, in order to not have it get overgrown/wild. This is not in question, and I only mention it as I know this is often focused on in questions like these.

All the children own their own houses (albeit mortgaged), 3 in Ireland and 1 abroad.

Does Stamp Duty apply to those living here if gifted or inherited?
Does it make those living abroad into 'property owners' and therefore not eligible for FTB status, if they choose to buy here?
Does owning property abroad have any bearing on FTB status in Ireland either?
Can the children be made joint owners of the property?
Does this carry any tax implications?
Ditto for the monies. Can they open a joint account and lodge the money there (as it will therefore not be subject to inheritance tax in the eventuality)?
I am aware that banks now require a PPS number when opening bank accounts, I assume that The Revenue Commissioners check accounts with large deposits with some kind of complicated algorithm in order to ensure tax compliance. If not, then why the PPS requirement? Money Laundering?

Note: I am not looking for ways to evade tax. But the more that the children can keep after tax, then the better (for them).
Also, I have an appointment with a solicitor to iron out things, but I would like to be forewarned and forearmed before I see him.

Sorry for all the questions, but things were popping into my head as I began typing.
I appreciate any and all constructive replies.
 
Caveat: This applies to property generally. I don't know about the tax treatment of agricultural land which might be different.

In general, it is better from a tax point of view, to will stuff rather that to gift it.

There is stamp duty on the property if gifted. There is no stamp duty if transferred via a will.
Any capital gains disappear on the death of a person. If you give a gift, it is a disposal for CGT purposes.

You can gift or leave up to €414,000 each free of Capital Acquisitions Tax. So as each is getting around €310k, this is another reason for not gifting it now.
If you gift someone a house now worth €300k and they sell it in 10 years for €400k, they will pay CGT on the increase in value. If you keep the house and it rises in value, there will be no CGT on the increase in value.

Some people are gifting now as prices are low and so CAT won't be payable. I am not sure about this as it means that more CGT will be payable.

Joint ownership of property is just not a good idea
It leads to all sorts of rows. Friendly families fall out over this issue a lot. It won't just be the 4 siblings - there may well be spouses who will have their opinions as well.

If you want the house to stay in the family, give one of the children the option to buy the house at current market value if they can. The house is worth €1m. They are entitled to €300k. So they have to pay €700k for the house. That will leave €900k to be divided between the remaining three children.

If they can't afford to keep the house, then it should be sold. But make a provision that the executor has up to three years to sell the house, so that one of the other children will have some time to maybe sell their own home and have enough to buy the house.

There are lots of other good reasons for not giving gifts now
You lose control of your estate. You are one big happy family now. But you may well be kicked out of the house by your children.

The needs of the children may change and you may not want to split it equally later.

If one of your children divorces, he will have assets which the spouse may have a claim on.

First Time Buyer status could be affected if they hang onto the house.

Are there any good reasons for gifting now?
The best reason is if one of the children needs money now. If so, give him his share now and adjust your will accordingly.

If you expect the tax treatment of gifts or inheritances to change in the near future.

Does giving away your assets reduce your means for social welfare purposes? I hope it doesn't, but I don't know.
 
Hi Tailesen

Thanks for pointing that out.

I don't know about the treatment of the passingo on of agricultural land so I have put in a caveat on my post.

Brendan
 
Agricutural Relief for Capital Acquisitions Tax reduces a gift / inheritance by 90% where the donee qualifies as a farmer.
This means that a gift of land of €3m can be reduced to 300k and no CAT is payable. If the relief is reduced to 50% then a gift of €3m would be a gift of €1.5m resulting in a CAT liabilty of €250k.
 
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