Brilliant question been on my mind for years.There is a 3000/parent allowance to give a tax free gift each year to a child. Is it possible to give a portion of the value of our primary residence as that gift?
i.e. when the house is eventually inherrited - say 10 years later - the child can say they already own a portion of the property worth €60,000 (3000*2*10)
If so how would you document such a gift?
Some complexities for sure but in my mind if you split the equity in the property into the slice that you own & the slice the banks owns then you could perhaps gift your children a thinslice from your equity every year. It's a novel idea but definetly worth pursuing with a solicitor.I think it would be difficult to document such a gift as you are splitting ownership. I'd talk to a solicitor in the first call. I can see stamp duty issues and a transfer won't be able to be done if there is any type of mortgage on the property. The small gift exemption is worth using but perhaps not with a property.
How do you avoid your children incurring a CGT exposure on any appreciation in value, bearing in mind that they're unlikely to live with their parents forever?Some complexities for sure but in my mind if you split the equity in the property into the slice that you own & the slice the banks owns then you could perhaps gift your children a thinslice from your equity every year. It's a novel idea but definetly worth pursuing with a solicitor.
Why so? It'm my slice of equity who & on what grounds could I be prevented? Property rights etc.(The idea of splitting the equity in the property into the slice that you own & the slice the banks owns is wishful thinking too.)
Unless property prices stagnated or deteriorated for years or decades on end, the CGT liability they'd pay after owning chunks of it for long periods should be much higher than that relating to the capital appreciation achieved in the limited window of the 2 years after your death.In my mind the CGT liability would be realised upon sale of the property in much the same way as if they had inherited it on my death & sold it 2 years later.
That misunderstands the basis on how mortgages work. They're taken over the entire property, not your "slice of equity" in it.Why so? It'm my slice of equity who & on what grounds could I be prevented? Property rights etc.
The bank have a right to repossess if you dont pay. You cant give away a bit of the property . when you get a morgage, you sign away the right to give a part of the property away without the mortgage holders permission.Why so? It'm my slice of equity who & on what grounds could I be prevented? Property rights etc.
Unless property prices stagnated or deteriorated for years or decades on end, the CGT liability they'd pay after owning chunks of it for long periods should be much higher than that relating to the capital appreciation achieved in the limited window of the 2 years after your death.
How do you avoid your children incurring a CGT exposure on any appreciation in value, bearing in mind that they're unlikely to live with their parents forever?
Thanks Brendan,This is the key point which puts the kibosh on the very creative idea.
Leaving aside the legal costs and transaction hassle for the moment, by giving the child €3,000 worth of the house, the child saves €1,000 in CAT (Assuming that they get in excess of €335k over the course of their life.)
But the child would face CGT on any increase in value on disposal of the house. Over a long period of time, this could be 100% which would wipe out the benefit completely.
The child would probably also lose any advantage of being a First Time Buyer as they already own or part-own a home.
So 100% for creative thinking.
But it doesn't work.
Go back to giving the child old-fashioned cash instead.
Brendan
Hang on a minute now! They don't save €1,000 in CAT. They save 33% of whatever that €3000 has increased to whenever they would have inherited it.This is the key point which puts the kibosh on the very creative idea.
Leaving aside the legal costs and transaction hassle for the moment, by giving the child €3,000 worth of the house, the child saves €1,000 in CAT (Assuming that they get in excess of €335k over the course of their life.)
If the increase was indeed 100% then the 3k slice of house (about a square meter's worth!) would have increased to 6k. CAT, if inherited at that point, would be 2k. If sold at that point, CGT would be only 1k. The benefit is not wiped out completely.But the child would face CGT on any increase in value on disposal of the house. Over a long period of time, this could be 100% which would wipe out the benefit completely.
True, but let's assume they already own a home.The child would probably also lose any advantage of being a First Time Buyer as they already own or part-own a home.
It can work - in certain, admittedly limited, circumstances. Let's assume we've got a property owner who has:So 100% for creative thinking.
But it doesn't work.
f) Chid has no risk of a creditor coming after them ( bankrupcy, business debts, messy divorce) and the "slice" of the house being an asset which they might try to come afterHang on a minute now! They don't save €1,000 in CAT. They save 33% of whatever that €3000 has increased to whenever they would have inherited it.
If the increase was indeed 100% then the 3k slice of house (about a square meter's worth!) would have increased to 6k. CAT, if inherited at that point, would be 2k. If sold at that point, CGT would be only 1k. The benefit is not wiped out completely.
This assumes the child sells the house on the death of the parent(s) and has already exceeded the CAT threshold. Should the child.choose to live in the house as PPR, then the CGT falls away and the benefit is 2k per annual transfer. (Minus any stamp duty which is quite small)
True, but let's assume they already own a home.
It can work - in certain, admittedly limited, circumstances. Let's assume we've got a property owner who has:
A) a valuable, mortgage-free property in which they intend to remain living for the rest of their life.
B) not a lot of free cash
C) a child to whom they would like to leave the house to in their will
D) said child has already received an apartment worth €335k from the parent
E) said child is a practicing solicitor who can handle the transaction in firm.
That too!f) Chid has no risk of a creditor coming after them ( bankrupcy, business debts, messy divorce) and the "slice" of the house being an asset which they might try to come after
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