Thanks so much for your response, I will look into that, can I ask is my thinking above re dwelling house relief correct or are there any snags I’m not seeing? Thanks againAnother option is a Section 72 life insurance policy. This is where the parent takes out a life insurance policy to help the child settle the CAT bill.
See here. Warning - it is very expensive!
I don't know the answer to your question sorry. Just wanted to say something that may well be obvious but can sometimes get lost in the pursuit of paying less taxes - it is often not healthy for a child to continue living under their parents' roof longer than is absolutely necessary. Certainly try to find ways to minimise taxes, but I don't think living there longer would be good advice other than for tax purposes.Am I correct in saying that if the daughter continues to live with her mother until she inherits then she could apply for dwelling house relief if the house was her principal residence and only home meaning she would not have to pay the CAT bill?
And it's always rather pointless to try to make elaborate long-term plans in the expectation of avoiding tax liabilities decades into the future as the applicable tax provisions could easily change in the meantime.I don't know the answer to your question sorry. Just wanted to say something that may well be obvious but can sometimes get lost in the pursuit of paying less taxes - it is often not healthy for a child to continue living under their parents' roof longer than is absolutely necessary. Certainly try to find ways to minimise taxes, but I don't think living there longer would be good advice other than for tax purposes.
It’s important to understand the pit falls too and would be negligent to not plan for the future as people can walk blindly into large tax bills, planning ahead is part of life.I don't know the answer to your question sorry. Just wanted to say something that may well be obvious but can sometimes get lost in the pursuit of paying less taxes - it is often not healthy for a child to continue living under their parents' roof longer than is absolutely necessary. Certainly try to find ways to minimise taxes, but I don't think living there longer would be good advice other than for tax purposes.
Not being smart, honestly, but what do you mean zero point in planning if daughter is still living with parents?Based on the average life expectancy, this inheritance should be in 30-35 years time when the daughter will be in her mid 40's.
Zero point in planning for what will happen if she is still living with her parents,
As far as I know the value of the property when you give it to your son is the value for CAT (future calculations). The life interest has no bearing on the market value of the property. So while your Son maybe able to avoid inheritance tax (assuming the values are below thresholds etc) he will still be liable for CGT on any uplift in the value of the property from when he inherits it (ie is the legal owner) and when he himself sells it.It's a pity the law in Ireland requires you to be living in the property at time of inheritance already. Here in Germany you can get similar relief if you take up occupation of the family home even post mortem (they'll give you about a year to move in) and remain living there for 10 years. I have given some thought to minimising my son's CAT bill when I pass on. My idea was to will the property to him but at the same time grant my wife a lifetime interest in it (it's rental property in Ireland as we live in Germany but whatever) so she collects the rent until she dies and my son inherits the property but it's worth less due to the lifetime interest I will grant my wife. If I die relatively young, that lifetime interest is worth much more and so my son's inheritance is worth much less. When my wife then passes on my son gains full control but is already the owner. This plan requires me to die first, which is statistically more likely but obviously not guaranteed. If my wife dies first I will probably gift the property to my son but retain a life interest in it, causing the value of the inheritance to be reduced in the same way. I need to look more closely at the ins and outs but I think using a life interest in this way is one possibility to reduce the CAT burden.
One approach which wouldn't require living with the parents. Start using the Small Gift Exemption; both parents start transferring €3k each (€6k total) to their daughter every year, when she has a spouse and children they each start gifting €3k to the spouse and children every year as well - they could be giving €24k every year tax free to a couple of parents with two kids. This would quickly add up to hundreds of thousands transferred tax free without impacting the €335k lifetime CAT allowance. Then when the parents retire they downsize and use the freed up capital to give the daughter €335k taxfree immediately towards a house, which will increase in value CAT/CGT-free in her name rather than theirs.Parents in their early fifties and daughter is 14, only one child, It’s not just to save on taxes, there’s other angles like cost of rent now and houses. they are very fortunate to have a space large enough that the daughter could live completely seperate from her parents however I do agree that it should not be the sole reason for daughter to live there as she may well decide to move out, start her own family, travel etc, it’s more to explore all the angles and to be prepared, I do understand that tax legislation could be very different in ten years time for example again it’s purely research and may well bot come to be.
I’m not sure about that, my understanding is if it’s his principle/only residence then there’s no CGT on any increase in price down the line however I’m open to being wrong on thatA
As far as I know the value of the property when you give it to your son is the value for CAT (future calculations). The life interest has no bearing on the market value of the property. So while your Son maybe able to avoid inheritance tax (assuming the values are below thresholds etc) he will still be liable for CGT on any uplift in the value of the property from when he inherits it (ie is the legal owner) and when he himself sells it.
If however your investigations find different to the above I would be very interested in same.
It won't be his ppr if it is rented out between the time he is the legal owner and when he takes actual ownership once the person with the life interest has passed away.I’m not sure about that, my understanding is if it’s his principle/only residence then there’s no CGT on any increase in price down the line however I’m open to being wrong on that
Ah, I understand nowIt won't be his ppr if it is rented out between the time he is the legal owner and when he takes actual ownership once the person with the life interest has passed away.
So I'm trying to eliminate or reduce my son's CAT liability when he inherits my property. I can't really plan for what he might then do with that property at a later date after I'm long gone. That's just too far away for me to contemplate. If he's anything like me though, he'll never sell ;-)A
As far as I know the value of the property when you give it to your son is the value for CAT (future calculations). The life interest has no bearing on the market value of the property. So while your Son maybe able to avoid inheritance tax (assuming the values are below thresholds etc) he will still be liable for CGT on any uplift in the value of the property from when he inherits it (ie is the legal owner) and when he himself sells it.
If however your investigations find different to the above I would be very interested in same.
I don't know if revenue have tables for lifetime interest and their affect on property prices.So I'm trying to eliminate or reduce my son's CAT liability when he inherits my property. I can't really plan for what he might then do with that property at a later date after I'm long gone. That's just too far away for me to contemplate. If he's anything like me though, he'll never sell ;-)
As long as leaving a lifetime interest to the property to my wife (no thresholds between spouses) causes the assessed value of my son's inheritance to fall then I believe my plan is sound. I assumed as Revenue has tables to work out the value of life interests based on age, that the value of my son'r inheritance would be the market value minus the value of the life interest to my wife.
If this assumption is incorrect I need to reconsider the whole idea.
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