Most cost effective way to help out a relative

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notfromhere

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I would like to assist a relative of mine who is a resident of Ireland. I reside overseas but I am also an Irish national.

Without going into the backstory of why I would like to help them or why they need help, the summary is that they are currently in a financial position where their debts are such that they are unable to fund a mortgage and are therefore stuck renting indefinitely. My initial thoughts was to offer to purchase a property in my name but allow them to live in it rent free but would ask that they pay any ongoing costs normally paid by the homeowner (ongoing property taxes / charges, utilities etc.)

I figured this setup would allow a simpler dissolution of the agreement if things changed down the track as they could vacate the property or I could sell (within relevant tenancy laws). Additionally, as I would not be earning any income from this purchase it shouldn't complicate my annual tax return where I live.

On further research I have discovered the existence of the "gift" or Capital Acquisitions Tax (CAT). My understanding is that even if no rent is actually charged, my relative would be liable to pay CAT on the imputed rent above the group thresh-hold (they would be group B).

Am I correct in this interpretation? If so, is the imputed rent self-reported or is it calculated by an external authority?

Is there an alternative arrangement anyone can suggest that would be more cost effective than this arrangement?
 
You're a good friend to have in tough times. Not being snoopy or anything like that, but is there much money involved in what you're proposing? I ask because you more than likely will need professional help to get this right.
 
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My take on your post is if you want to help them it should not be all down to tax ,Some times helping someone to help them self means not looking at it from a tax point of view,The day the have to worry about tax will be a good day for them,
 
It may be your take on it, but the reality is quite different in the world we live today. The person trying to help another is trying to do so within the law.
 
It's a noble aspiration, but...
Your relative may not want this help.
You might fall out with your relative over this.
Enter into it looking at the worst case scenario of losing your money and property.
Try to stay friends with your relative if things go pair shaped.
 
noproblem said:
It may be your take on it, but the reality is quite different in the world we live today. The person trying to help another is trying to do so within the law.
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The first thing that jumps out is they may be happy to rent the OP seams to want to help them provided the look at the world through OP eyes,
 
The OP has said they will 'offer' to help, nothing wrong with that.

notfromhere, do you have a spouse/partner/child with whom you could be joint owner of the property and does your relative likewise have a partner? You could gift multiples of the €3,000 per annum tax- free threshold for gifts if this is the case, it might be sufficient to cover the imputed rent.
 
llgon said:
The OP has said they will 'offer' to help, nothing wrong with that.

notfromhere, do you have a spouse/partner/child with whom you could be joint owner of the property and does your relative likewise have a partner? You could gift multiples of the €3,000 per annum tax- free threshold for gifts if this is the case, it might be sufficient to cover the imputed rent.
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I agree if you offer help don't expect anything back it may not work out like OP thinks ,
 
Thanks for everyone's replies.

I'm definitely in the working out what is feasible / legal / cost-effective stage at this point. I want to make sure that if I offer help in a particular way that it is actually something I can follow through with. Last thing I want is to offer to do x,y or z and then find out later that it isn't feasible :oops:

Will definitely be getting legal advice and putting things in writing before finalising things - have listened to enough horror stories!

I do know my relative is unhappy that they will never own their own home. I am not sure as yet whether it is because of the downsides associated with renting long-term or whether it is actually because of not "owning" your home if you know what I mean. If it is the latter, then my proposal may not be acceptable to them.

Another setup that I thought might work is that I charge rent based on the ongoing costs of home ownership + 20% non-resident landlord tax. This would be less than the 33% CAT rate and the discounted rent amount would then be subjected to the CAT and could avail of the €3,000 annual tax-free + group thresh-holds. This arrangement would still see me making no income from this purchase so should not need to be declared on my income tax.
 
notfromhere said:
Thanks for everyone's replies.

I'm definitely in the working out what is feasible / legal / cost-effective stage at this point. I want to make sure that if I offer help in a particular way that it is actually something I can follow through with. Last thing I want is to offer to do x,y or z and then find out later that it isn't feasible :oops:

Will definitely be getting legal advice and putting things in writing before finalising things - have listened to enough horror stories!

I do know my relative is unhappy that they will never own their own home. I am not sure as yet whether it is because of the downsides associated with renting long-term or whether it is actually because of not "owning" your home if you know what I mean. If it is the latter, then my proposal may not be acceptable to them.

Another setup that I thought might work is that I charge rent based on the ongoing costs of home ownership + 20% non-resident landlord tax. This would be less than the 33% CAT rate and the discounted rent amount would then be subjected to the CAT and could avail of the €3,000 annual tax-free + group thresh-holds. This arrangement would still see me making no income from this purchase so should not need to be declared on my income tax.
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You also need to take into account If anything happened to you will the people receiving your estate be happy to continue the agreement,
 
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Why don’t you just give them a mortgage?

Lend them the money.
They buy the house
Your solicitor draws up an ordinary mortgage agreement

It could be interest only. Much cheaper than renting

If you charge market rate there will be no CAT.

You will be taxed on the income probably in the country you are resident.


If you buy the house it’s much more complicated. They won’t own it. You will be their landlord. (Being their lender is less “stigmatic “.


It’s easier to unwind a loan. For example if they can remortgage. Any increase in vdlue will accrue to them and it will be tax free.


They will feel that they own it because they willl.
 
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Brendan Burgess said:
Why don’t you just give them a mortgage?
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For the same reason the bank doesn't want to give them one! If they end up becoming bankrupt then I can more or less kiss that money goodbye. I assume in Ireland when a tenant finds themselves bankrupt, their landlord's assets are protected from liquidation proceedings or is it different over there?

I feel much less comfortable holding a mortgage (especially on a relative) as an asset rather than residential property given this.
 
Hi notfromhere

If you are not completely comfortable with your relatives' integrity, then you should not get involved at all.

I had assumed that they were a good risk but the banks were turning them down because of a bad record.

notfromhere said:
Without going into the backstory of why I would like to help them or why they need help, the summary is that they are currently in a financial position where their debts are such that they are unable to fund a mortgage and are therefore stuck renting indefinitely.
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The system works against decent people. If you buy a house and rent it to them at say 70% of market rent. If they move on, you will be stuck with that rent for the new tenant.

If you lend them the money, they could go for a PIA and seek to have the mortgage written down.

So you would have to be absolutely sure of their integrity not to stiff you, whichever you do.

It sounds as if you are not sure of this, so avoid.

Brendan
 
I would never avoid helping someone out no matter what trouble they are in it would be better finding out how the are cutting them self and and helping them avoid it happening in the future ,Putting a sticky plaster over the wound is ok when you know the wound will heal it self,

The op could finish up helping them to over extend beyond there means which is the position they are in right now,
 
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notfromhere said:
they are currently in a financial position where their debts are such that they are unable to fund a mortgage and are therefore stuck renting indefinitely.
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I think you need to give more information on this.

Are they insolvent at the moment?
What are their earnings?

We are only guessing at suggestions if we don't have this information.

Brendan
 
Brendan Burgess said:
The system works against decent people. If you buy a house and rent it to them at say 70% of market rent. If they move on, you will be stuck with that rent for the new tenant.
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Thank you for raising this point, I didn't realise that rent was determined that way in Ireland. I assumed it was just a "whatever the market will bear" type situation! This definitely makes this option more risky than I previously thought.

Brendan Burgess said:
I had assumed that they were a good risk but the banks were turning them down because of a bad record.
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Ironically they are in this position because they overextended themselves financially to help another relative.
 
"overextended themselves financially to help another relative"

Then don't add yourself to the chain.
 
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