House deal with parents

H

hazelcas

Guest
Hi,
hoping someone can advise me on the following. I have done a deal with my parents where they sign ownership of their house over to me and I pay half the value of the house to my sister. That way my sister gets half her inheritance now and can pay it off her own mortgage and I get to own my own home. My parents are also happy then that their children are both sorted financially. However by paying half the house value to my sister, no cash to my parents, when my parents sign-over the house to me am I going to get caught for huge tax?

Can someone please advise me what tax I and my parents are going to be liable for when we change ownership of the house and what are my options to minimise the tax liability?

Thanks.
 
Without getting into the taxation side of it, I think they are insane to sign their home over to you without any conditions attached. If the guy you marry turns out to be an idiot or if he divorces you, they could very easily lose their home.
 
Depends on family circumstances I suppose- there can be good reason for all these things - or not.

They can sell their house to you for half the value - you pay stamp duty at half the normal rate on the total market value of the property, they don't pay CGT ( if it is their primary residence) and they can then gift the money to your sister.

Make sure the solicitor goes through all the ups, down, possibles and maybes with everyone. Even a right of residence in their own home will not protect them if feelings go sour. An exclusive life tenancy might have more effect particularly if you are not going to live there.

Just thoughts.

mf
 
This is a huge mistake. Below are the gift tax thresholds.

A Son/Daughter €478,155
B Parent*/Brother/Sister/ Niece/Nephew/Grandchild €47,815
C Relationship other that Group A or B €23,908

First of all note that your parents are gifting you the house ( you are not inheriting your private residence and are therefore under the gift tax area )

If the house you are "given" is worth more than 478k you will be liable for tax on the difference at 20%. For arguments sake say it is worth 600k. thats 20% of 122k straight away - about 25k

Your sister will have to pay 20% of ( 600,000-47,815 ) well over 100k.

Your sister needs to be given the cash from your parents to avoid massive taxes. One way to do this is for your parents to sign over half ownership to you and half to your sister and then for you to buy out your sister. ( Assumes your parents have no mortgage - if so they will need to pay it off before doing this ) This may cost a bit more in stamp duties etc but will save a fortune on tax.
 
I also think that even your parents sell you the house for a small nominal sum the REveenue will tax you on the actual value

i.e if to try and get around it they sell it to you for,say, €45,000 and the house is actually worth ,say, €450,000 the revenue will deem that you have gained €450,000 and will tax you on that.......
 
Not 100% correct,

They would base tax on 450k - 45k being 405k of a gift as such. Even then this would be below the threshold.
 
I'm with Art on this. Things change. what are the advantages for your parents?
 
Just in relation to your sister, if your parents are transferring on the condition that you pay half the value of the house to her, then it will be deemed a gift from your parents to your sister, not from you, so the higher tax threshold will also apply to her.
 
It's fairly straightforward really. The fact that the money actually passes from sister to sister does not matter, when it is in reality the parents who are controlling the distribution of the funds. They might just as well have said that they would take the money themselves- THEY are the ones controlliing where and to whom the money goes, they are the ones who are transferring ownership.
 
But where do the revenue come in. It is two seperate transactions all be it that they are linked. My understanding / experience of the revenues approach to this situation is to deal with them seperately and levy gift tax on the sister to sister transaction.

You say it will be deemed a gift from parent to her sister - what I am asking is who will deem it so ? - if you are saying the revenue will deem this and not seek gift tax at the sibling transfer threshold I would be eager to learn how this is done / applied for as I have relations who are being chased for gift tax in pretty much an identical situation.
 
Disponer in certain connected dispositions. [CATA 1976 s8] 8.—(1) Where a donee takes a gift under a disposition made by a disponer (in this section referred to as the original disponer) and, within the period commencing 3 years before and ending 3 years after the date of that gift, the donee makes a disposition under which a second donee takes a gift and whether or not the second donee makes a disposition within the same period under which a third donee takes a gift, and so on, each donee is deemed to take a gift from the original disponer (and not from the immediate disponer under whose disposition the gift was taken);
 
"under a diposition" - does this need to be a written contract to act in a certain manner once the original gift is received ???
 
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