Two 70 year old siblings purchasing property

Hi,
What are the tax implications of two siblings (both over 70) purchasing a property to be used by one - the other is a UK resident.
When one sibling 'kicks the bucket' what are the tax implications for the survivor.

Does the division of the share in the property have to be in accordance with the amount of money put in to the purchase price - or can they decide on a 50/50% share?

Thanks for any pointers.

Hi facetious

You need to take specific advice from someone who understands the tax interaction between the UK and Ireland.

What are they trying to achieve. Is it the UK guy helping his brother buy a house?

If so, a loan might be a better idea.

Brendan

Brendan Burgess said:

Is it the UK guy helping his brother buy a house?

Brendan

Click to expand...

May well be women / sisters

May well be.

Thanks for your inputs.

It is a brother and sister (both basically computer illiterate hence I'm asking the question). He lives in Ireland, she in the UK.
I told him that Irish tax laws on gifts to siblings are pretty hefty- my understanding it is something in the region of 33.5k, accumulative, tax free.

Thus, he wondered if they bought a house together, if he died first, what kind of inheritance tax would the sister have to pay and should she die first what would he have to pay tax wise.

As far as I understand it, he would be the main contributor to the purchase as he would be living in the property, probably 75/25 split. He also wants to know could they have a 50/50 share in the property even if he was paying more towards the purchase. Maximum purchase price would be in the region of 135k.

A though has just struck me as I write, he could probably gift his sister an amount to make it a 50/50 share. (pause while I check UK taxes). But just checking the UK system, he may gift £3,000 per year or £6k in the first year.

From my knowledge of the family, he has cancer so is likely to die first.

What is the objective of the exercise?

Is he trying to find a home to live in and needs her help?

Is he trying to leave her the money with as little tax as possible?

Is she looking for an investment?

In Ireland anyone can give anyone else €3,000 a year and get the small gifts exemption.

In the UK, it's a very different system. He can give her a gift while living which has highish tax exemption. But if he dies within a few years, IHT applies.

facetious said:

He also wants to know could they have a 50/50 share in the property even if he was paying more towards the purchase. Maximum purchase price would be in the region of 135k.

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Yes, they could buy a property for €120k with him paying €60k and lending her €30k to help buy her share.

I would think it's messy though.

Brendan

Hi Brendan

They are each trying to organise themselves so that the survivor of the two pays as little tax as possible, obviously! Who likes paying tax!!

As I understand it, they both have sufficient funds to purchase a property for €135k separately. However, he feels that she will out-live him (probably due to his cancer) and wants to organise himself accordingly. However, again as I understand it (without prying too much into their affairs) she is also trying to organise herself though it appears she has nieces and nephews on her dead husband's side to whom she will leave money. She is not looking for an investment but a way to reduce any inheritance tax for him should she die first.

I do know that he wants to buy a bungalow as he is having difficulty with the stairs in his apartment (two flights of stairs inside plus a set of steps outside). So I do understand his need to move.

Presumably neither have children. Perhaps if they are looking to minimise inheritance tax an option may be to pass some directly to the next generation rather than from one to the other first and then onwards.

This is obviously dependent on their circumstances.

If he is buying a house for €135k and has the money, he should just do so on his own. If he does not have the full amount, she could lend him the money but it should be documented as a loan and include the documents with the will.

Joint ownership of property is messy. Brothers and sisters do fall out. Some older people suffer dementia and that would be another complication.

She would end up owning €34k worth of the property. It would be an investment for her so subject to Capital Gains Tax.

If it's his home, there will be no Capital Gains Tax.

He can give her €3,000 a year without any CAT. If he lives for 10 years, that would be €30k - virtually the same as the share of the property. He should only do this if he has loads of money or trusts that she will give it back if he needs it.

Brendan

Many thanks, Brendan, I will pass on your info and let them sort themselves out. It's no easy to be a go-between especially when I am not completely familiar with either of their situations.