Any implications if I get a gift to pay down my mortgage?

Rob

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Hi I'm looking for some advice before going down the professional route.

I have a family member who wishes to provide a large lump sum so as I can clear a large percentage of my mortgage.

Is there any tax implications if he wishes to make the payment directly to my lender into my mortgage account?
 
Yes, you may be liable for gift tax. It will depend on the relationship and the amount.
 
I agree - you will be liable for gift tax and depending on the relationship and the amount given - you will be taxed. if you have a partner - it may be possible to pass you the money legally by splitting the amount given to you by obeying the limits your family member gives to other people. ie. your dad gives you the bulk of the money which is under the limit. your dad then gifts your partner a small amount of the money under the limit.
 
Indexed Thresholds for Capital Acquisitions Tax

For the purpose of Gift and Inheritance Tax, the relationship between the person who provided the gift or inheritance (i.e. the Disponer) and the person who received the gift or inheritance (i.e. the beneficiary), determines the maximum tax free threshold - known as the "group threshold".
Historically group thresholds were indexed by reference to the Consumer Price Index.
Section 109 Finance Act 2012 amends Schedule 2 of the Capital Acquisitions Tax Consolidation Act 2003. This abolishes the indexation of the tax-free group thresholds. The amendment applies to gifts and inheritances taken on or after 7 December 2011.
Under the Finance Act 2011 the indexation factor for 2010, will continue to apply to gifts and inheritances taken on or after 8 December 2010 to 6 December 2011. The indexation factor for 2010 (1 January 2009 to 31 December 2009 inclusive) was 1.361.
Indexed group thresholds GroupRelationship to Disponer Group Threshold from 8/4/2009 to 31/12/2009Group Threshold from 1/1/2010 to 7/12/2010Group Threshold from 8/12/2010 to 31/12/2010 Group Threshold from 1/1/2011 to 6/12/2011Group Threshold from 7/12/2011 to 5/12/2012 Group Threshold from 6/12/2012ASon/Daughter€434,000€414,799€332,084€332,084€250,000€225,000BParent*/Brother/Sister/
Niece/Nephew/Grandchild €43,400€41,481€33,208€33,208€33,500€30,150CRelationship other than Group A or B€21,700€20,740€16,604€16,604€16,750€15,075
*In certain circumstances a parent taking an inheritance from a child can qualify for Group A threshold.
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Group Thresholds Applicable for Capital Acquisitions Tax

For the purpose of Gift and Inheritance Tax, the relationship between the person who provided the gift or inheritance (i.e. the Disponer) and the person who received the gift or inheritance (i.e. the beneficiary), determines the maximum tax-free threshold - known as the "group threshold". The Group thresholds for 2012 and previous years are shown below.
Note: (Date of death or date of gift indicates the relevant year for the correct indexed amount).
Group Thresholds Applicable for Capital Acquisitions Tax YEARGroup A
(Son/Daughter)
(after indexation)Group B
(Parent*/Brother/Sister/Niece/
Nephew/Grandchild)
(after indexation)Group C
(Relationship other that at A/B)
(after indexation)On or after 06/12/2012€225,000€30,150€15,07507/12/2011 - 05/12/2012€250,000€33,500€16,75001/01/2011 - 06/12/2011€332,084€33,208€16,60408/12/2010 - 31/12/2010€332,084€33,208€16,60401/01/2010 - 07/12/2010€414,799€41,481€20,74008/04/2009 - 31/12/2009€434,000€43,400€21,70001/01/2009 - 07/04/2009€542,544€54,254€27,1272008€521,208€52,121€26,0602007€496,824€49,682€24,8412006€478,155€47,815€23,9082005€466,725€46,673€23,3362004€456,438€45,644€22,8222003€441,198€44,120€22,0602002€422,148€42,215€21,1082001€402,253€40,225€20,1132000€380,921€38,092€19,0461999€244,932€32,658€16,3291998€239,219€31,896€15,9481997€235,600€31,413€15,7071996€231,791€30,905€15,4531995€226,267€30,169€15,0841994€220,934€29,458€14,7291993€218,078€29,077€14,5381992€211,221€28,163€14,0811991€204,936€27,325€13,6621990€198,079€26,411€13,2051984 to 1989€ 190,461€25,395€12,697
*In certain circumstances a parent taking an inheritance from a child can qualify for Group A threshold.
 
Thanks for the replies guys.

The relation in question is a cousin so I assume that this would fit in Cat C ("other")?

The sum in question is much greater than the Cat C threshold.
Therefore, in order to minimise the tax implication, would I still be liable if we opened a joint account, for example, and the sum was lodged into there and the lump sum mortgage payment paid from there?
 
If it's a gift, it's a gift and therefore subject to CAT.

Do you intend to pay it back? If so, you could classify it as a loan. But only if it's a genuine loan and not an effort to evade CAT.

Brendan
 
Thanks for the replies guys.

The relation in question is a cousin so I assume that this would fit in Cat C ("other")?

The sum in question is much greater than the Cat C threshold.
Therefore, in order to minimise the tax implication, would I still be liable if we opened a joint account, for example, and the sum was lodged into there and the lump sum mortgage payment paid from there?

If by we in the above you mean you and your cousin the answer is no.

The CAT tax rate is 33% at the mo so thats a lot of tax so a bit of planning is required.
The threshold is cumulative so doing it piecemeal wont work, in case you think of that:)

Couple of questions.
How much mula is in question here?
Have u a "better or for worse" half that co-owns the house.
Whats the monthly payment?

Couple of ideas to get you started:
Use the annual gift exemption of euro 3,000, perhaps to pay the interest.
If u have the other half, thats another 3,000.
Can you expand on that group with trustworthy family members?

Of course if you and the cousin want to keep it tight then perhaps he can lend you the money
 
The sum in question is €200k.

If he was to "lend" me the money, would there need to be evidence of repayments?
 
The loan needs to be evidenced and a repayment structure agreed.

There are a number of ways of doing this that will stand up to tax scrutiny.

The ones of these I have done sometimes needs reflection in the will of the lender as the loan is an asset in the lender's estate and can be contentious depending on the families involved.

What about the annual 3000 euro gift point?
 
The sum is €200,000 so it would take a lifetime if we considered the €3,000 tax free gift per year.

Would it be classified as a "gift" if my cousin and I opened up a joint bank account and the money was lodged into there?
 
And are minors i.e. Children under 18 years old considered as Cat C in the CAT specifications?
 
Would it be classified as a "gift" if my cousin and I opened up a joint bank account and the money was lodged into there?
That question makes no sense. Obviously if both you and your cousin open a joint bank account and lodge money there is no gift. However if he lodges the money and you withdraw it then there is a gift and the relevant CAT will apply. Other than the annual exemption there is no legitimate way of avoiding CGT in this transaction, other than selling a part ownership in the property to your cousin!
 
Sharing a bank account does not mean that suddenly the gift disappears. The money remains his (I am assuming you are thinking that if his name is on the account and your name is on the account it somehow negates his ownership of the stash and allows yours with no penalty - no can do)

As to the minors, are you planning on some of his "gift" passing to your children and then to you? I suspect that Revenue might have some... strong opinions on the matter. If you are the direct beneficiary of the cash the minors will not have been in receipt of the gift. (And don't try the "it is their home too" route - they are not liable for your mortgage debt)

Basically it all smells like evasion.
 
Do you have a partner?
If so you could do 15k each under the 2014 thresholds and then 6k gift each so that is 42k in year one.
As to taking a lifetime at 3k pa, 33% tax should soften your cough here.

Keep asking questions on different ideas
 
Thanks so much ircoha. That idea is definitely something to think about. I have a partner and two children so that is something to consider.
 
Leave the kids out for now, as mentioned earlier, it raises the stakes for a closer look by revenue. Dont be "greedy" so to speak.
Just remember that if u exceed 80% of the threshold you must make a return on line providing ur and the cousins pps numbers, and ur partner if she receives.
This links the two of you
 
Could your cousin buy the house off you and then gift it to you after 3 years and you would get dwelling house exemption?????

#doubleirish
 
Joe_90 we had actually thought of that but didn't think it would be a runner in terms of possible tax implications. I'm not fully aware of house dwelling exemption. Could you briefly explain or I'll look it up.
 
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