Parent gifting house to two sisters

Hi all,

I've looked through other threads and couldn't find one that deals with this issue.

In a nutshell, my wife's father, wants to gift half of a house he owns to my wife and the other half to her sister. We're going to live in the house so instead of receiving 50% of the house, the sister is to receive the cash value of 50% of the house. The house has just been valued at €300k.

Option 1
The father gifts 50% of the house to my wife and we get a joint mortgage to purchase the other 50% for €150k off him. The father then gives a cash gift of €150k to the sister. This is the way we had intended on proceeding but because our bank KBC are insisting that both mine and my wife's name go on the deeds, I might be liable for CAT.

Option 2
The other option that I see is that the father gifts 50% to my wife and 50% to the sister so the house is jointly in their names. Then myself and my wife get a joint mortgage of €150k and buy the sister out of the other half.

Is option #2 the best option in terms of tax, would the sister have any CGT or other tax implications in option #2?

Appreciate any advise!

It's a gift rather than a bequest so the ideal scenario would appear to be as follows! Your wife's father to transfer the full title to you and your wife for 150K. You will then get a mortgage on the property and pay this amount to your wife's father. He can then gift 150K to your wife's sister.
Option 2 would be an option, providing that title did not have to be transferred to both sisters. Best to seek the advice of a good solicitor before any final decision!

Have you considered your wife's father's capital gains tax liability on the transaction.

If this property is not the father's ppr then most likely CGT will apply.

Thanks for your advice.

44brendan said:

It's a gift rather than a bequest so the ideal scenario would appear to be as follows! Your wife's father to transfer the full title to you and your wife for 150K. You will then get a mortgage on the property and pay this amount to your wife's father. He can then gift 150K to your wife's sister.

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The problem with this is that my name will need to go on the deeds as well and surely that means Revenue will deem that I have received a gift from my father in law and I'll be liable for CAT?

44brendan said:

Option 2 would be an option, providing that title did not have to be transferred to both sisters. Best to seek the advice of a good solicitor before any final decision!

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I've spoken to my solicitor but he hasn't really given me any advice. He's just said I should consult my account (which I'm in the process of doing).

Dr.Debt said:

Have you considered your wife's father's capital gains tax liability on the transaction.

If this property is not the father's ppr then most likely CGT will apply.

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Yes you're right, there will be some CGT that he'll be liable for.

Joey111 said:

The problem with this is that my name will need to go on the deeds as well and surely that means Revenue will deem that I have received a gift from my father in law and I'll be liable for CAT?

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There's a concession for that sort of scenario, where the bank requires a spouse's name be included on the deeds for morgage approval:
[broken link removed]

You might want to consider getting a different solicitor to deal with this, if your current on isn't aware of this concession, as it needs to be done correctly (transfer from his name to hers, and subsequently at the behest of the bank your name is added to the deeds.)

mandelbrot said:

There's a concession for that sort of scenario, where the bank requires a spouse's name be included on the deeds for morgage approval:
[broken link removed]

19.16 Connected Gifts
Under section 8 CATCA 2003, gifts are deemed to come from the original disponer when they are gifted on within 3 years before or after the original gift. However, in cases where, for example, a gift (the first gift) is taken by a married child of the disponer and consists of a house or a site for a house and that child in raising a mortgage on that property finds that the lending institution as a requirement for the mortgage demands that the property is placed in the joint names of the spouses (the second gift), then provided adequate evidence is given that the transfer into the joint names is at the insistence of the lender and that the first gift was not made to enable or facilitate the making of the second gift Section 8(1) will not apply. Section 8(2) covers this situation and will also apply in all other cases where it can be shown to the satisfaction of the Revenue that such gifts are not so connected.​

You might want to consider getting a different solicitor to deal with this, if your current on isn't aware of this concession, as it needs to be done correctly (transfer from his name to hers, and subsequently at the behest of the bank your name is added to the deeds.)

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Wow mandelbrot, you sir/madam have just made my day! Thank you.

I'll certainly be taking this up with my solicitor.

mandelbrot said:

as it needs to be done correctly (transfer from his name to hers, and subsequently at the behest of the bank your name is added to the deeds.)

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So would this be the order of events:

1. Father in-law transfers 50% of the house to my wife. Deeds are now in father in-law's name and my wife's name.
2. Bank provides us with letter stating that they are insisting that my name go on deeds as well as condition of mortgage.
3. We get joint mortgage and buy remaining 50% off father in-law. Deeds are now in my name and my wife's.

I'm obviously going to go through all this with solicitor and accountant but would appreciate your opinion too, thanks.

Joey111 said:

So would this be the order of events:

1. Father in-law transfers 50% of the house to my wife. Deeds are now in father in-law's name and my wife's name.
2. Bank provides us with letter stating that they are insisting that my name go on deeds as well as condition of mortgage.
3. We get joint mortgage and buy remaining 50% off father in-law. Deeds are now in my name and my wife's.

I'm obviously going to go through all this with solicitor and accountant but would appreciate your opinion too, thanks.

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No, definitely NOT that!

I've never actually done it but I'd expect it would be:

1. FIL transfers to your wife - the deed/contract stipulates that there is to be consideration of €150k.
2. Your wife goes to the bank (presumably having already gotten approval in prinsiple in advance), and seeks a mortgage of €150k on the property.
3. If the bank insist on you being on the deeds, then your name goes on, and the Revenue concession applies.

Ah OK, so he transfers the entire property to my wife with a legal stipulation as you mention.

Last question, and thanks again for your help, would the fact that it's a joint mortgage have any effect in your opinion? We've already got approval in principal from the bank for a joint mortgage.