Gifting a property to children over X yrs

[homeowner]

In lieu of gifting 3K per year per parent (ie 6K in total or is it 3K combined) to each of our 3 children over the next X yrs, if we have a property personally which we are currently using as combined rental and holiday usage for ourselves can we "allocate" the equivalent of a % of the property to each child tax free per year to the equivalent value (9k or is it 18k) per year so that over time they own the property outright without needing to pay inheritance tax when we eventually pass on? Is that legit?

 

[thecoffeepod]

I wouldn't

The small gift exemption lets each parent give €3,000 per child per year free of Capital Acquisitions Tax.

So ye can gift €6,000 to each child annually, (which comes to €18,000 total across three children per year) and it won't affect their lifetime limits

Thats fine

The problem is CGT

The gifting a share of a property to someone is treated as a disposal at full market value, (even if no money changes hands.)

So if the property has gone up in value since ye bought it, you would owe 33% CGT on the gain of the portion you gift, every single year you do it.

( Revenue will not accept a discounted valuation either)

They substitute the open market value regardless.

There is no CGT on death.

When you die, you are not treated as having sold or transferred your assets & your children inherit the property at its market value on the date of death, and no CGT is owed from your estate on whatever gain built up during your lifetime.

By gifting incrementally you are triggering a tax liability that would simply not exist if you held the property and left it in your will.

Also, every transfer of a share in a property needs to be legally registered, which means solicitor fees each time, for each child.

Remember Stamp duty applies to each transfer too, at 1% of the value of the share being transferred.

It is also worth checking whether your children would face any CAT at all on inheritance.

The Group A lifetime threshold for parent-to-child transfers is currently €400k per child.

If the total value your estate passes to each child stays under that figure, they could inherit tax-free anyway,( with no annual gifting strategy needed)

Surely holding the property and passing it through your estate is almost certainly the better outcome for your family.

 

[Sue Ellen]

Don't think it would work and these two AAM previous threads might give some advice.

Revenue rules that annual small gift exemption must be actually given and not just "earmarked".

Interesting article in the independent; (https://www.independent.ie/irish-news/man-32-who-received-almost-500k-from-parents-fails-in-tax-battle-with-revenue-despite-communion-money-claims/a845644263.html) I would tend to agree with the ruling here that the small gifts from parents was...

www.askaboutmoney.com

Small Gift Exemption, older kids, 1 gift possibly in a trust

Hello, Myself and my husband would each like to gift our 2 children the max Small Gift Exemption of 3K per year, each. We are married . We would like to do this for the foreseeable future – basically as long as we can afford to . As we understand it, we could gift 6K between us to each child...

www.askaboutmoney.com

 

[homeowner]

Our PPR will use up the tax free inheritance allowance per child. We want them to have the holiday home to use after we are gone otherwise they will likely have to sell it just to pay the inheritance tax.

 

[CharlieMac]

We want them to have the holiday home to use after we are gone otherwise they will likely have to sell it just to pay the inheritance tax.

Then just leave it to them in your inheritance and no CGT will be due. Sounds like they will have to find money to pay the tax bill either way.

 

[homeowner]

have

I dont understand your reply. Inheritance allowance will be taken up by our PPR. If they own it outright no inheritance tax will be due. They can then sell it 30 yrs later if they wish after a lifetime of usage. They can rent it out also. Otherwise they would have to sell it likely when we die.

 

[POC]

It could be many years before your children receive this inheritance - their financial circumstances will be different by then. They may not need to sell the holiday home, or they might sell the family home and use some of that money to pay inheritance tax. One way or the other they'll be getting a substantial inheritance and it'll be up to them how they manage it.

 

[ClubMan]

can we "allocate" the equivalent of a % of the property to each child tax free per year to the equivalent value (9k or is it 18k) per year so that over time they own the property outright without needing to pay inheritance tax when we eventually pass on? Is that legit?

Wouldn't that strictly need the deeds/folio to be updated each time to note the respective shared ownership proportions of the property and that would be like a mini conveyancing each time incurring the relevant legal costs? Otherwise there's no actual gift as per this thread?

Revenue rules that annual small gift exemption must be actually given and not just "earmarked".

Interesting article in the independent; (https://www.independent.ie/irish-news/man-32-who-received-almost-500k-from-parents-fails-in-tax-battle-with-revenue-despite-communion-money-claims/a845644263.html) I would tend to agree with the ruling here that the small gifts from parents was...

www.askaboutmoney.com

 

[Bronte]

I dont understand your reply. Inheritance allowance will be taken up by our PPR. If they own it outright no inheritance tax will be due. They can then sell it 30 yrs later if they wish after a lifetime of usage. They can rent it out also. Otherwise they would have to sell it likely when we die.

What was the year of purchase and price of the holiday home. What is its current value. Is it used much? What do you think should happen to both home and holiday home on death? As in sold or not? How will you fund care in old age?

 

[Daphne]

Just to add to all the reasons why this is impractical - you’ll have to professionally value the property every year to decide what percentage of its value equates to the annual small gift exemption. By the time you’ve done this, paid the CGT and the stamp duty and registered the percentage changes in ownership and paid the solicitor fees - and bear in mind you’ll be doing this every year - it will have cost you pretty much the same amount as they will have saved in tax.

 

[misemoi]

Another thing to consider is that inheritance tax rules change over time, so you constantly have to adjust your plans for the changing tax landscape. In reality, how will 3 different families be able to easily share two assets split three ways? It is possible but is it probable? They might just each want to take their share and move on. I know myself and siblings and partners all have very different interests and goals.

 

[Itchy]

Otherwise they would have to sell it likely when we die.

1. Sell it to them now at market price. You could also provide the finance and write that off each year using the small gift exemption. Ownership split three ways is messy. I suppose you will retain an interest in using it as well.
2. Consider section 72/73 policy that would cover the IHT, tax free. You could or the kids could cover the costs, assuming they want to inherit the property IHT free.

 

[ClubMan]

2. Consider section 72/73 policy that would cover the IHT, tax free.

Key Post - Is a Section 72 policy good value?

This was raised in another thread . I have never seen an example of how it works in practice. Let's say I am 65 and am worth €1m which I want to leave to one daughter. I am in good health. I take out insurance for the CAT bill. The CAT bill if I were to die today would be about €220k (€1m...

www.askaboutmoney.com

 

[Millie*]

Could you gift each child €6000 per year for x years with the specific instruction they keep it ear marked to deal with any potential inheritance tax.

In 10 years there would be €180000 in the pot which would cover the CAT on a house value €540000 approx.

 

[ClubMan]

Could you gift each child €6000 per year for x years with the specific instruction they keep it ear marked to deal with any potential inheritance tax.

A gift with specific conditions/instructions arguably isn't a gift at all. A genuine gift means that the recipient is free to do what they like with it.

 

[Bronte]

1. Sell it to them now at market price. You could also provide the finance and write that off each year using the small gift exemption. Ownership split three ways is messy. I suppose you will retain an interest in using it as well.

That will trigger CGT if the property has gone up in value. They could try and time it to when there is a property crash. If such a thing were to happen. They could also sell it and retain a life interest, which would bring down the sale value.