Buying Grandparents House

Dundalk_2021

New Member
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Hello all,

So basically I'm early 20's and thinking about buying a house in the next couple of years (2-3 years). I've recently received an inheritance from a grandaunt of 16,250 (very grateful). I have not received any other inheritance. I'm about to graduate a professional degree with starting salary (45k) and will be applying for the mortgage alone.

My granny has progressed dementia and lives in a care facility. I hope no one thinks I'm being ruthless by discussing buying her house. However, I am extremely close to her and between my family, they are all happy with the idea of the family home staying in the family, as no one else has any intention of buying the house. They also discussed a fair sale below market value could be agreed on.

It's a victorian mid-terrace, in need of a retro-fit (full rewire, heating system, roof). I know the property market is skyrocketing at the minute but the house was valued at 175,000 in December 2020 (my parents were thinking of selling there's and decided to get both houses valued at the time).

I'm wondering what are the tax implications for buying the house below market value if any? I would ideally like to buy for 150k considering the work that needs to be carried out. If anyone has experience buying a house from a grandparent I'd love to hear. No one is living in the house full-time anymore so was also wondering if there was anything about living in a house not paying rent but being primary address etc not sure how if that would affect anything.

Thanks in advance
C
 

Brendan Burgess

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43,281
is your granny availing of the Fair Deal Scheme?

If so, you will need to figure out the implications of her having a load of cash instead of having a house.

If she has dementia, can she actually sell the house to you? Has someone got a power of attorney?

This is my understanding of the tax implications:

If the house is worth €175k and you buy it for €150k, then it would be regarded as a gift of €25k.

You have a €32,500 threshold. You have used up €16,250 of it, so you have €16,250 left.

So the CAT calculation would be
Gift €25,000
Small gift exemption: €3,000
Remaining Group B exemption: €16,250
Taxable : €5,750
CAT at 33%: c. €2,000

So very small in the overall context of things.

Brendan
 

Gordon Gekko

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I think grandaunt is Group C, so the full €33,500 Group B threshold should still be available (plus the €3,000 Small Gift Exemption).
 

Dundalk_2021

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is your granny availing of the Fair Deal Scheme?

If so, you will need to figure out the implications of her having a load of cash instead of having a house.

If she has dementia, can she actually sell the house to you? Has someone got a power of attorney?

This is my understanding of the tax implications:

If the house is worth €175k and you buy it for €150k, then it would be regarded as a gift of €25k.

You have a €32,500 threshold. You have used up €16,250 of it, so you have €16,250 left.

So the CAT calculation would be
Gift €25,000
Small gift exemption: €3,000
Remaining Group B exemption: €16,250
Taxable : €5,750
CAT at 33%: c. €2,000

So very small in the overall context of things.

Brendan
Hi Brendan,

Really appreciate the breakdown here. Yes, she is availing of Fair Deal and has now been in the care facility for 4 years.
Unfortunately, my grandmother has lost capacity (for nearly as long as she has been in care) and she did not sign an enduring power of attorney. So from what I understand nothing can be done with the house until she passes away (without going through the ward of court process which isn't something anyone wants to do). ***

There are 6 children that her estate will be divided equally to and my parent is the executor of the will. Does the breakdown you provided (but with 32500 rather than 16250 because full group b is intact) change if and when the day comes she passes away?

****( I do not have a death wish or the like on my grandmother, I am just trying to understand the position I would be in if I was in the position to buy the house when the day comes).

TIA
C
 

Ryan

Registered User
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149
It’s not going to be legally possible to buy it until her death. even if it was it wouldn’t be in her financial interests to sell it because the nursing home would take 7.5% of the proceeds for each year she spends there.
 

Thirsty

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2,952
Fair Deal Loan is 3 years @ 7.5, so Gran has already maxed out.

OP - nothing to stop you moving into property now as caretaker, pay the bills & keep the place maintained.

Then you'll be best to wait until the (unlooked for) day that her estate is wound up.
 

twofor1

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Fair Deal Loan is 3 years @ 7.5, so Gran has already maxed out.
Gran is only maxed out as long as she owns the house. If sold, even after 4 years, the proceeds immediately become assessable.

If you sell your home, farm or business before or after the 'three-year' cap has expired​

If you sell an asset that was subject to the 'three-year' cap at any stage, the money of the sale becomes assessable as part of cash assets.
You must tell the Nursing Homes Support Scheme Office about any sale. You must do this within 10 working days of the date of the sale. This is so we can carry out a new assessment of your weekly contribution.

https://www2.hse.ie/services/fair-deal-scheme/financial-assessment-your-payment-towards-care.html

OP - nothing to stop you moving into property now as caretaker, pay the bills & keep the place maintained.
I would guess there are many Fair Deal houses occupied by grandchildren or other family members, on a casual caretaker arrangement like this.
 

NoRegretsCoyote

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I would guess there are many Fair Deal houses occupied by grandchildren or other family members, on a casual caretaker arrangement like this.
CSO says about 1% of all homes are occupied by a non-owner rent free.

It is very common indeed.
 

Thirsty

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@twofor1 - the Fair Deal Loan only applies to the persons PPR.

If there's no PPR, there's no Fair Deal Loan.

My point was that the max that can be reclaimed on foot of the fair deal loan has already been reached.

There's no benefit to selling the PPR at this stage.
 

RedOnion

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@twofor1 - the Fair Deal Loan only applies to the persons PPR.

If there's no PPR, there's no Fair Deal Loan.
Yes, but if you sell the house you now have assessable cash that's counted towards your fair deal contribution.

You're confusing it by looking at the 'Loan' which is only secondary to the contribution.
 

Thirsty

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Yes, but if you sell the house you now have assessable cash that's counted towards your fair deal contribution.

You're confusing it by looking at the 'Loan' which is only secondary to the contribution.
Not confusing anything.

The loan only applies to PPR; if you don't own a PPR you don't get any loan.
 

RedOnion

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Not confusing anything.

The loan only applies to PPR; if you don't own a PPR you don't get any loan.
Apologies, I misread the context of your post without rereading the full thread, and thought you were arguing a point rather than agreeing with it.

In summary, if the house is sold, the fair deal contributions are reassessed. Which is why there are thousands of empty houses around the country.
 

Thirsty

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...thousands of empty houses around the country.
Not sure re numbers - but lets say there's 20k currently in care homes.

Say 1/3 own a PPR - 7k. Then deduct the 1% that are being lived in by family member; so 6,300.

Six thousand empty homes.

And with the current legislation, renting them out makes neither financial nor legal sense; for either the owner or family who have to manage the property and subsequent, if unlooked for, probate & sale.
 

NoRegretsCoyote

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Not sure re numbers - but lets say there's 20k currently in care homes.

Say 1/3 own a PPR - 7k. Then deduct the 1% that are being lived in by family member; so 6,300.

Six thousand empty homes.
These numbers are hard to get with precision.

But care home population is 31k. Census 2016 showed that 81% of over 65s were owner-occupiers without a mortgage. Not all use the Fair Deal of course. So maybe assume 20k dwellings in the Fair Deal scheme at any point.

It's hard to know how many are actually unoccupied due to the incentives of the Fair Deal though. I've had a few friends who've occupied granny's house rent free as family haven't wanted it vacant. I nearly did the same for my great-aunt's house once. All of these cases were in Dublin though. Census says 27k dwellings occupied rent free nationwide, but these could be for all sorts of reasons.

Which is why there are thousands of empty houses around the country.

I'm not sure how feasible it is to let or sell many of these unoccupied properties anyway. Often the cash isn't there for repairs, and for sale there can be issues around enduring power of attorney and the like. I'm an only child and if the situation ever arose I would be very reluctant to let a parent's house to a third party, even with a change to the Fair Deal rules. The hassle of dealing (and eventually getting rid of) a tenant just wouldn't be worth it to me.

So could a change to the Fair Deal rules bring more houses into occupancy? Yes. Is the effect likely to be large? Not clear.
 
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