Dis/Advantages of accepting gift of half family home?

D

Dsimp

Guest
Hi There:-

I'm still saving to get onto the property ladder, and have been offered a half-share in my Mother's house - which is probably worth something around €400-500,000. I'll be in a position to buy myself within the next year or so, but is there an advantage to accepting this gift now, or should I wait?
What are the implications with regard to First Time Buyer's stuff, Conveyancing, Stamp Duty, Capital Gains, future Inheritance allowances, and creating a favourable impression in that future mortgage meeting?
Thanks in advance for your help...

Simon.
 
If you could just explain briefly the reasons / rationale behind this? Whats works very well in one family situation may cause problems in another.

Is it for future tax reasons? All of the following are important issues i.e. your age, marital status, mothers age, marital status, do you already live there?, do you intend to live there or is it simply a gift now while you live elsewhere, will your mother live there, are there other siblings, is any money changing hands ( and if so, how much?), is there a current mortgage on the property, is the house worth 400K - 500K or is the half share worth that amount? ( important for gift tax), have you taken any other gifts or inheritances? Are there any other issues that you can think of that might be relevant?

I've recently come across a complicated messy situation where a father wants to transfer a property to a daughter as a gift. Which is fine - except that he is legally separated, this property was acquired years ago before the separation and, crucially, it was not disclosed in the Court proceedings, plus there is no Deed of Waiver ( i.e. one spouse declaring no interest). There are horrendous CGT, Stamp Duty and fraud issues involved.

Anyway, post back with more info and we can try and give an informed reply.

mf
 
Thanks mf - I'll try to clarify:-

> Is it for future tax reasons?

Well, I'll be inheriting the property anyhow, but my Mother thought it would be good for me to have an asset in my name when trying to persuade lenders to lend me money for future assets! Which makes sense, but I'm trying to figure out if there are any hidden pitfalls.

>All of the following are important issues i.e. your age, marital status,
>mothers age, marital status, do you already live there?, do you intend
>to live there or is it simply a gift now while you live elsewhere, will your
>mother live there, are there other siblings, is any money changing
>hands ( and if so, how much?), is there a current mortgage on the
>property, is the house worth 400K - 500K or is the half share worth that
>amount? ( important for gift tax), have you taken any other gifts or
>inheritances? Are there any other issues that you can think of that
>might be relevant?

I'm single (living with partner), she's separated. The house was built with her share of the separation, and there is no mortgage. So she does own it outright. My mother will continue to live there. I'm an only child, don't live in the house, and have never received gifts or inheritances. The entire house is approx €400-500,000 (as yet unvalued)
There's also a house in Dublin owned by my Mother (which my Aunt lives in), about the same value, maybe a little higher, again no mortgage, which I could have the option of taking a half-share of instead.

Hope that clarifies things...
 
Ok - thats helpful.

If you go ahead,

You're getting a gift of (say) 250K. You should have no inheritance tax - CAT. When I say you're getting a gift, I mean that on paper, you will be worth 250K more than before.
I think in the circumstances ( i.e. mother continues to live there) that a lending institution will not take this on board as an asset for any future mortgage borrowing.

You need to formalise the situation so you'll need a solicitor to do the conveyancing. Your mother will be advised that she should take independent legal advice.

On the figures you've outlined, you will not pay stamp duty.
Your mother will not pay CGT - as it is a disposal of a portion of her principal private residence.

Overall, it is a good thing but more from your perspective of future planning - i.e. once the half interest vests in you, even if you and your mother have a massive falling out ( it happens!) it is likely that the other half will follow on her death.

There are other issues - can your mother do this? Does she have a Deed of Waiver - does your father need to consent?
Will you lose your FTB status - I think ( and this is a grey area) that you only get to use your FTB status once( unless in a marital breakup situation) for Stamp Duty. So yes I think you will be treated as a non FTB when you do go to buy.

So, is it worth doing? You need to weigh it up and decide.
I take the view that a bird in the hand ..... and all that.
But as against that, if you inherit the whole lot on death, there would currently be no stamp duty, you'd inherit at market value.....

mf
 
Thanks mf - there are advantages and disadvantages...

With regard to this point:-

> I think in the circumstances ( i.e. mother continues to live there) that a
> lending institution will not take this on board as an asset for any future
> mortgage borrowing.

Would this be different if she gifted me half or her second house, in Dublin, which she does *not* live in?
 
But your aunt lives there - so thats a pitfall. Unless she goes and then you get the whole house?

Plus, from what you say, you are not getting a whole interest only a half interest and unless your mother was willing to offer her interest in either as security, which a solicitor would advise her against ( possibility of incurring debt and losing property at a late age.......), I don't see much difference.

Unless you want to get down to the nitty gritty and work out who is going to die first? Or if your aunt could go elsewhere?

Sorry, but these are the necessary human sides to the financial issues.

But you're lucky to be getting this kind of gift whether it is now or in the future.

mf
 
So, ultimately, while half of the asset would be mine, I could not use it as security anything else without the consent of the co-owner, which she would be advised not to give?
And this applies to both the house that the co-owner lives in, and the one that she doesn't?

Hmmm... Gift horse... Mouth... Hmmm...
 
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