Transfer of cottage from pensioner parents to 4 offspring

[housebound]

My parents need advise on how best from a tax perspective to all parties, to transfer an old cottage on 1acre, that they own to their 4 daughters as their inheritance.

My parents are pensioners (68 & 70).
They live in their farmhouse and have already transferred the farmland to their son who has built his own house on the land. That is considered my brothers inheritance and the transfer was completed due to my dad retiring from farming and my brother taking over the farming reslonsibities.

They have earmarked the old cottage on 1 acre as the shared inheritance for their 4 daughters.

They want to transfer the ownership of the cottage as soon as possible as they feel that
(A) it impacts on them getting a medical card by them own it as an asset.

(B) By selling the cottage that each daughter will have a small lump sum that can be used for a house deposit/ renovations/ college funds for grandkids etc as we see fit.

My question is
(1)what is the most tax efficient way for my parents to give myself and my sisters this inheritence ?

(2) 2 of the daughters have never bought a house so if they transfer this cottage to the 4 daughters does this then cause any implications for the 2 daughters in relation to their 1st time buyer status?

(3) 2 of the daughters already own houses therefore how does the proposed transfer of the cottage effect them in any way as this would then be a second house?

(4) as the cottage is not or would not be the ppr of any of the 4 daughters then what would be the tax implication on sale of the cottage ?

(5) is it more efficient for my parents to sell the cottage themselves and then divide the proceeds as they wish between the 4 daughters or does that then open my parents up to cgt or any other tax themselves.

Note .........the cottage was bought by my dad in approx 1975 and he lived there until about 1979 at which point my grandparents moved into the cottage and my parents moved into the farmhouse.


I'd much appreciate any advice.
Thanks

 

[Brendan Burgess]

(5) is it more efficient for my parents to sell the cottage themselves and then divide the proceeds as they wish between the 4 daughters or does that then open my parents up to cgt or any other tax themselves.

This seems to be the way to go.

Whether your parents sell it in the open market or gift it to their children, it will be a disposal for Capital Gains Tax purposes.

The only way to avoid CGT is for your parents to leave it to you in their will. On death, Capital Gains disappear.

hat is considered my brothers inheritance

I would be very careful about this. Who considers it your brother's inheritance? Your parents must make a will. If they want to leave their estate to the 4 sisters, they should do so. If they die without making a will, your brother will be entitled to 1/5th of the estate.

Brendan

 

[housebound]

Thanks Brendan. It would be the least hassle way for sure if they just sold it themselves and then do what the want with the proceeds.

 

[Joe_90]

Make sure that when considering the CGT on the cottage that the PPR in relation to dependent parents in residence is considered!!!! Potential for a significant period exempt there.

 

[housebound]

Hi Joe_90 ,

The cottage hasn't been lived in by my parents as their ppr though since the early 80's . After that my grandparents moved their until they passed away late 90's. Since then it's been mainly an unoccupied cottage except for the past 5years my brother has lived there and will be there probably another year until his house is completly finished.

The cottage in question is approx .25 miles from the farmhouse where my parents currently reside. They plan on willing that farmhouse to my brother in the event of their death.

 

[Joe_90]

Make sure that when considering the CGT on the cottage that the PPR in relation to dependent parents in residence is considered!!!! Potential for a significant period exempt there.

The period that the grandparents lived in your fathers house may qualify for PPR.