Tax implications for future sale of family home as part of separation agreement

[MOJO RISING]

I'm in the later stages process of separation with divorce going before courts soon. I h have been renting for the past 15 months. The soon to be agreed divorce separation stipulates that she and the kids are to remain in the family house. the agreement see her the kids stay in the house until youngest is 18. I am in agreement with this and will sign the house over to her based on an agreement which has passed muster with my solicitor. The mortgage will be continued to be paid off by ex which is about a one third of the equity. The agreement is that when the youngest child is 18 the family house is to be sold or of I receive my owed equity. I will then receive the frozen equity which is approximately 160,000. Will I have future capital gains liability be on this considering that it is a frozen equity and over the next 10 years or so? the proceeds will not be from PPR.

My question is how I put something in place with revenue so that I don’t end up with tax implications due to the settlement agreement. I will have a few tough years but the future equity release will be my financial rescue so to speak, I will have enough money for a deposit to buy a house myself this year.

 

[Brendan Burgess]

will sign the house over to her

the family house is to be sold or of I receive my owed equity. I will then receive the frozen equity which is approximately 160,000.

So she will own the house in her own name. You will have no share in the house whatsoever. But you will have a sort of "loan" to her of €160k repayable based on her promise to sell the home.

Sounds very hard to enforce. The 18 year old will be in College so you will be under huge moral pressure to leave her with the house until he has finished College.

Even if she does sell the house, how can you be sure that she will actually pay you? The only way would be to have a legal mortgage on the house so it could not be sold without you being paid off.

I would think that you should retain some sort of ownership. Don't sign it over to her.

 

[Brendan Burgess]

Inflation is another concern. €160k in 15 years will buy a lot less than €160k now.

let's say that the figures now are
House value €420k
Mortgage €100k
Equity €320k
Your equity €160k or 38% of the value of the property.

Why don't you agree that when the house is sold, you get 38% of the sales proceeds?

Your agreement to the sale must be received so that she does not sell it at undervalue to a connected person.

Brendan

 

[Brendan Burgess]

If you leave the agreement as is and receive €160k in ten years, there would be no tax implications.

She is just paying you the deferred value of the sale of your PPR.

Brendan

 

[MOJO RISING]

If you leave the agreement as is and receive €160k in ten years, there would be no tax implications.

She is just paying you the deferred value of the sale of your PPR.

Brendan

Hi Brendan, , There is a signed legal document in place outlining the particulars so i don't have huge concern there., but I will take your advice in consideration. The deferred value of sale and the tax liability is what i was expecting, appreciate your advice.

 

[dubdub123]

Is there any way you can complete a transfer of equity now and have ex take over the mortgage and pay you the equity?
What if something happens to your ex and they are unable (or unwilling) to keep paying mortgage? You are basically in a situation where you are dependent on the actions of another person to secure your financial future.
Is there any risk here that you might need to pay CGT eg if you buy another house in meantime, or if this house is not considered as your PPR? If i was in your situation i would seek tax advice on this separate to your legal advice.

 

[Brendan Burgess]

There is a signed legal document in place outlining the particulars so i don't have huge concern there

But very difficult and very expensive to enforce.

If she does not voluntarily sell the home, you will spend years in court and a fortune on legal fees trying to force the sale. A good solicitor will probably tell you not to bother as you will eat up the proceeds in legal fees.

Brendan