LPT: How does LPT deferral work once its deferred?

casiopea

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Hi Guys,

Scenario: Elderly parent (of 5 grown up children) living alone in family home. Parent will not sell or downgrade. Parent is eligible for deferral as is living only on widow pension.

This means I believe from reading this link http://www.*****************.com/deferral-of-the-property-tax.html that the full tax will due to be paid by the children on the event of the parents death. This could be a sizable amount if the elderly parent lives for hopefully 20 years or more.

My question is this. The 5 children have very different circumstances and financial wellbeing. If each child owns one fifth of the debt - can the defferal happen again at that point for their portion of the debt if one or more of the children qualify? Or is the debt simply owed by the family?

What recommendations are there for these circumstances (must be quite common)? Should the parents will be updated to reflect this deferral and what should be done?

Thanks for your help.
cas.
 
that the full tax will due to be paid by the children on the event of the parents death. This could be a sizable amount if the elderly parent lives for hopefully 20 years or more.

Do you know for sure the contents of your mothers will or are you assuming that all five will inherit an equal share of the estate?

This could amount to a sizeable amount after 20 years but will still
be less than the value of the estate unless your mother has other debt that you don't know about
 
Will the tax be taken first from the sale proceeds of the home by the executor and paid to the revenue before the balance is distributed?
 
Do you know for sure the contents of your mothers will or are you assuming that all five will inherit an equal share of the estate?


Yes, all 5 children will jointly be left the property. No other debts or assets.

This could amount to a sizeable amount after 20 years but will still
be less than the value of the estate unless your mother has other debt that you don't know about

Yes, and of course a lot can change in 20 years, or we could be in this scenario a lot sooner. Its a lovely home and I think we always felt we would always keep it, 2 of my siblings are in careers that, while noble, earn nothing really so I think its always been understood that they might buy it internally in the family in the event of my mothers death (though we have nothing formal in place here). But it seems that this property tax means that the house must be sold. As even those of us who are more financially stable would find this debt hard, we have mortgages, children, debts of our own that we are beholden to.

However I think this scenario must be relatively common for a lot of irish families....Im guessing the first step is to go back to the family solicitor and include a clause to deal with this debt in the will?

Will the tax be taken first from the sale proceeds of the home by the executor and paid to the revenue before the balance is distributed?
Exactly - and what if we dont want to sell the house - is there a plan for debt repayments or is it owable immediately with the execution of the will?
 
Originally Posted by mandelbrot http://www.askaboutmoney.com/showthread.php?p=1319811#post1319811
EDIT: And just to reiterate a quite simple fact - if the LPT is deferred for 20 years, at current rates, the liability including interest would run to somewhere around 5 - 6% of the property value (assuming static prices).

Just to try to bring some perspective to this - take a house worth 400k, assume LPT at 0.18% p.a. plus 4% interest, for 20 years (ignoring inflation or any change in value) - this results in a liability of just over 22k. God forbid my Dad died in the morning and left me €400k worth of house after him not paying LPT for 20 years, I think I'd be willing to deal with that tax consequence.

This is a post taken from another thread that may go some way to allaying your fears over deferral cost build up
 
This is a post taken from another thread that may go some way to allaying your fears over deferral cost build up

Considering house prices are considered low right now, and given that the media has been indicating since pre HC that the tax will go up after the first few years - that post is likely to be showing a very optimistic underestimation of events.
 
Considering house prices are considered low right now, and given that the media has been indicating since pre HC that the tax will go up after the first few years - that post is likely to be showing a very optimistic underestimation of events.

All guesswork/speculation i suppose as regards property and LPT price increases, but as long as the LPT % increases are kept level/below property price rises then surely the beneficiaries aren't going to be any worse off than in the example quoted
 
Exactly - and what if we dont want to sell the house - is there a plan for debt repayments or is it owable immediately with the execution of the will?

Interesting point. Can the Revenue force the sale of the house to get their tax. Is the tax linked to the house or the owner of the house or both?
 
Considering house prices are considered low right now, and given that the media has been indicating since pre HC that the tax will go up after the first few years - that post is likely to be showing a very optimistic underestimation of events.

So you believe everything you see/hear in the media do you?!



I knocked together a spreadsheet, to cover a period from 2014 - 2035, and with the following assumptions:
  • prices static until 2016 and an average price inflation of 2% in nominal terms thereafter
  • LPT rate static until 2016 and increasing by a factor of price inflation plus 1 percentage point, so that's a 3% increase in the LPT rate EVERY year from 2017 - 2035, meaning the tax is at 0.316% p.a. in 2035 (75% higher than the starting rate of 0.18%).
  • Interest remains at 4% until 2016 and becomes 6% after that
  • The bands remain unchanged between now and 2035, and LPT is charged on the midpoint of the band, as is the case now.
So, taking the example of a house currently valued at 265,000, my rule of thumb calculations based on the above assumptions, suggest after 22 years of full deferral, the amount falling due would be €24,855 on a property with a market value of €386,000. That's 6.44%.
 
All guesswork/speculation i suppose as regards property and LPT price increases, but as long as the LPT % increases are kept level/below property price rises then surely the beneficiaries aren't going to be any worse off than in the example quoted

Probably not, but plenty of "uncalculatables" (for want of a better word).

Property value - unknown what the changes will be, up to and including a valuable property attracting a relatively high tax and then going on fire and being worth very little when it comes to sale.

LPT - unknown how it will pan out over the years.

Length and type of deferral - god knows, people live to all kinds of ages and have all kinds of low incomes.
 
up to and including a valuable property attracting a relatively high tax and then going on fire and being worth very little when it comes to sale.

I think you mentioned this senario either in an earlier post or another thread. How often every year do we expect this to happen? Isn't this the reason homeowners have house insurance
 
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