Letting sibling live in inherited house

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GoldWings

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My mother has Willed her house to me (she is a widow). She is quite unwell now and I am trying to prepare my mind for upcoming eventualities.
My sister has had a change in circumstances. Assuming I inherit the house, as per the Will, I would like to offer it to my sister to live in, indefinitely.
Then, upon my sister's demise, the property would return to me and my family. She has expressed great interest in this proposed arrangement.

The house is not in great shape and there are structural issues. There's no central heating... no shower and so on. It hasn't been updated in decades. The house is probably worth about 80k. I think it would be worth about 110k if the issues were fixed and it was modernized. As it stands, I don't think anyone would rent it. But family would be ok with it, if that makes sense. The plan would be, that my sister can do what she wants with the house, to make it livable for her for her lifetime. She wouldn't have the funds at all to buy the house ( I wouldn't feel right selling it to her), or any house or even rent any place at the moment. And I am interested in keeping the house in my family.

(I will go to an accountant and solicitor when the time comes to put an agreement on paper).

The question I have is, what are the tax implications for me and my sister? Do I need to become a landlord? Does anyone have informal advise on a tax efficient way to make this happen? i.e. she can live in the house I inherited.
 
You can let your sister live in a house you own. In practice you can charge your sister a small notional rent and if its under €3k then it is covered by the small gifts exemption and there are no tax implications for anyone.

GoldWings said:
The plan would be, that my sister can do what she wants with the house, to make it livable for her for her lifetime.
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Then it gets pretty awkward as she could claim that some of the value of the house is hers.

GoldWings said:
She wouldn't have the funds at all to buy the house ( I wouldn't feel right selling it to her), or any house or even rent any place at the moment.
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You don't say what your sister's age and income are, but most adults have some income, even if it's very small. You could lend her €80k over 20 years at 1% and her repayments would be €370 a month. No one needs any cash right now, basically you give her the house in return for a personal loan to be repaid. There is stamp duty and legal fees of course but this is one way for her to take ownership of the house.


There are many options and permutations in between of course - these are only two!
 
I wish to retain ownership of the property, so I can then pass it on to my own family. That would be part of the deal.
Thanks for the advice - especially the piece on her claiming some value.. New territory for me!
 
GoldWings said:
I wish to retain ownership of the property, so I can then pass it on to my own family.
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I know you're sentimental about the house but with my pseudonymous outsider's perspective I suspect your own kids would be much happier with cash than with an €80k house in need of renovation at some unlikely point in the future.

I've seen this in my own family with one sibling trying to buy others out at below-market value due to attachment to the house and it caused a fair bit of friction (now thankfully healed). 15 years later everyone's happy that it fell through.

I think you're great to be fixing your sister's housing need. But try not to be sentimental about the property in question as there might be a better solution at the same value for everyone.
 
GoldWings said:
My mother has Willed her house to me (she is a widow). She is quite unwell now and I am trying to prepare my mind for upcoming eventualities.
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Your mother is still alive?
Where is she living?
If she is still in the house, shouldn't it be improved now to make it more comfortable for your mother?

Where is your sister living?

It seems a bit odd to me that your mother is leaving you a house you don't need while leaving nothing to her other daughter, who does need somewhere to live.

What is your sister's marital situation? Is she married? Does she have children?

For a house worth €80k , it would seem that the most logical thing to do would be for your mother to leave the house to your sister.

If your sister has no dependants, she could leave the house to you and your children in her will.

Brendan
 
NoRegretsCoyote said:
In practice you can charge your sister a small notional rent and if its under €3k then it is covered by the small gifts exemption and there are no tax implications for anyone.
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I don't follow this.

If Sister A pays Sister B rent, surely Sister B must declare it for Income Tax and pay Income Tax on the rent?

If no rent is paid, in theory Sister A would be getting a gift from Sister B, but it would be covered by the small gifts exemption and no CAT would arise for Sister A.

Brendan
 
Brendan Burgess said:
Your mother is still alive?
Where is she living?
If she is still in the house, shouldn't it be improved now to make it more comfortable for your mother?

Where is your sister living?

It seems a bit odd to me that your mother is leaving you a house you don't need while leaving nothing to her other daughter, who does need somewhere to live.

What is your sister's marital situation? Is she married? Does she have children?

For a house worth €80k , it would seem that the most logical thing to do would be for your mother to leave the house to your sister.

If your sister has no dependants, she could leave the house to you and your children in her will.

Brendan
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The will could also be structured in such a way that the OPs sister is entitled to live in the house until her death where it then passes to the OP.
This could be via a Life Interest or Right To Reside. See link for additional info.
ipoa.ie

Life Interest v Right To Reside - Irish Property Owners' Association

Take care when preparing wills, it is important to be precise in drafting your intentions, life interest v right to reside
ipoa.ie ipoa.ie
 
It could.

But I am not sure that it is warranted to have such complexity for an €80k house that needs a lot of work.

It seems simpler to leave the house to the sister who needs it and let her look after it.

Brendan
 
Is the house actually safe to live in? Like you mention structural issues along with no shower, heating..
Is there not a minimum standard that it needs to be in to rent out? (Even if its to a family member for little or no rent, or in exchange for house upgrades) . It sounds a bit like a teardown job.
 
Thanks all

I don't really feel like answering some of the more personal questions above, but let's just state that my mother is not in any situation to change her Will at this stage. It's not possible and the house was left to me for a reason.

Yes the house is safe to live in. There's live-in care there too. The structural issues I mention are in relation to my understanding of the value.

Sorry that this sounds a bit odd! The family know and are happy I've been willed a house (there's no clause whatsoever). Will cannot be changed now. I'm delighted to have been willed same. 80k now but the house, will appreciate, in years, I'm without a doubt on that.
Sister would be ok without my offer, but it would help her out to no end and I don't want to charge her for the favour. And I want the house to pass on to my kids.

I don't feel I have an answer to my question yet. Let's assume I brought the house to some standard.
Do I have to charge rent and become a landlord? Do I have to charge a market rate? Can I charge a pittance, below 3k? Is that legal? Sorry the questions are naive.
 
The only issue to be addressed now is whether the will can be changed and you have answered that.

Though you should also address the issue of whether your mother is living in a suitable house. If not, then you should make the house suitable now. And that will probably pre-empt some of the other questions.

Wait until you own the house before you address any of the other issues.

Brendan
 
You have the yearly 3k allowance. You also have the category B inheritance of €32.5k lifetime before your sister is liable to inheritance tax liability.

You can "rent it" to your sister for whatever fig you decide. If it is well below market rent then any difference will be deemed a gift and go against the above exemptions.

If the property is in your and your wife's name (assuming you are married) then your wife can also give 3k per year gift exempt and also your sister would be entitled to category c inheritance threshold. Might be group B but have not checked I a while.

Assuming the rent pressure zone is still in operation any rent set would be subject to the rpz legislation.
 
This is getting very confusing.

If your sister pays you rent in real money, you will pay Income Tax at the marginal rate on the rent received. It does not matter whether that is €1,000 or €10,000. If the rent is €1,000 a year, you will pay Income Tax on the €1,000. There is no annual exemption.

If your sister pays you no rent, you will not have to pay income tax on the rent you should have received. However, she could be deemed to have received a gift from you equal to the value of the market rent. Gifts are subject to Capital Acquisition Tax. The first €3,000 she "receives" each year is exempt as a small gift.

Brendan
 
It is indeed confusing, perhaps needlessly.

AFAIK You can allow your sister to live in your house without charging her rent if you wish.
 
While I salute the generosity of the OP. In the majority of these situations I hear about it never ends well when a family member is left in a property they don't own like this.
 
AlbacoreA said:
While I salute the generosity of the OP. In the majority of these situations I hear about it never ends well when a family member is left in a property they don't own like this.
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How many such cases have you come across?
 
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