Which is more efficient; To Gift in lifetime or pass in Will?

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Rosebuds

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Hello, I have a question please around CGT and CAT relating to what’s the most efficient way to approach passing a house to my child. If anyone has experience or knowledge on this topic it would be truly appreciated.

I inherited my parent’s home over 20years ago. The property is still in my deceased father’s name. I am in my 70s and live in my own home with my spouse. I wish to pass my childhood home to my son. The property is valued at approx. 280k and is in need of approx. 200k renovation works to bring it up to a comfortable state. My son would be funding the rebuild.

From what I understand, with indexing approx. 50k is due on CGT if I were to pass this from my name to my child during my lifetime. I understand that if CGT is paid on an asset then the benefactor can offset this from their CAT liability, is this correct? Does the house need to be the asset that pushed them over the CAT category threshold for the offset to be allowed? For instance 280k is below the threshold but in the future if my son was to inherit another asset would he be able to offset any of the CGT I paid if the house I passed to him wasn’t the asset that pushed him over the limit?

What I see as options are...

Option 1 – Pass the property to my son now and my son funds the rebuild.

I pay 50k CGT. To be able to avail of the offsetting rule and reduce my son’s future CAT liability I would consider giving him a lump sum now instead of after my death . This would be to bring him over the threshold so what he would be liable to pay would be offset against my CGT paid.

If the CAT bands were to increase in my lifetime to back to where there were 10yrs ago he’d never be over the band anyhow.

Option 2 – I will the property to my son. He funds the rebuild now, lives in the property now but doesn’t take ownership until after my death. Therefore I wouldn’t need to pay CGT .Is there any disadvantage here that I’m not thinking of? If the property is now worth 280k but after he puts 200k in it it’s worth 500k how is this considered when calculating CAT if he was the one who funded the improvements not me? I think if he funds the build it would be seen as a gift to me from my son and tax would be payable, unless I could make a lifetime deal with son that he wouldn’t need to pay me rent in lieu of the works he has done my my property.


Option 3 – Does it make sense for me to gift the house to my son now but that I retain a set monetary interest in the property? For example, would it make sense if I gifted the house worth 280k to my son but I retained an interest to the value of 250k in the house? Could he then pay the 200k to rebuild and then on my death he is given my fixed monetary interest in the property (not a % that would vary in value with market).


Any options you think I should consider or points that you may have would be much appreciated. Thank you .
 
You say the property is still in your fathers name. Does this mean you haven't taken out probate yet? If not, i'm assuming that if you die, your will, leaving your fathers house to one of your children won't mean anything as it's not your property to leave. This would result in a completely different inheritance scenario for your children.
 
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I was just curious as to what happens if you never apply for probate and the house remains in the name of the deceased indefinitely. It obviously cannot be sold or rented out - but presumably you potentially avoid/delay having to pay any CAT due as well if it remains empty particularly where the deceased has no children. In exceptional cases - for example a remote property that needs modernisation and might be very hard to sell - would that make some financial sense?

Is this part of the reason why there are so many empty properties in rural Ireland - nearly 200,000?
 
Mags0709 said:
Is this part of the reason why there are so many empty properties in rural Ireland - nearly 200,000?
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There aren't next or near 200,000 empty properties in rural Ireland - despite what the official figures say - but the scenario described above is quite common.

The OP needs proper tax advice tailored to their circumstances, as the potential costs of getting all this wrong are horrendous.
 
noproblem said:
You say the property is still in your fathers name. Does this mean you haven't taken out probate yet? If not, i'm assuming that if you die, your will, leaving your fathers house to one of your children won't mean anything as it's not your property to leave. This would result in a completely different inheritance scenario for your children.
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I don't believe that failure to take out probate would change the inheritance scenario. Even without probate, you are entitled to the property and can will that entitlement as if it were a registered title.

Of course if your son wanted a loan secured against the property the title would have to be cleared up.
 
A friends mother died recently and the mother never took out probate when her husband died. It was always the mothers intention to leave everything to her daughter, she had 5 other children, all boys. The mother died, had a will made leaving everything to her daughter but never did take out probate. The children never really got on, but now the estate is going to be divided equally among the children as the estate was never legally the mothers to leave. Bad vibes coming from all concerned and I believe it will end up in the courts. That's why I made my comment in the first place with regard to probate. All the above is what I was told by the daughter who is very honest and trustworthy.
 
We had a very old family friend who didn't take out probate when her husband died. House was in his name only. She died intestate. She had promised house to my aunt. However no will. No children so second cousin appeared on scene. Never visited her, my aunt was down as next of kin on hospital appointments, collected pension. My aunt didn't want anything but now cousin is in receipt of house. Up for sale at 450k but probate causing issues. He didn't even know her birthday and had to phone my aunt for it.
 
amtc said:
We had a very old family friend who didn't take out probate when her husband died. House was in his name only. She died intestate. She had promised house to my aunt. However no will. No children so second cousin appeared on scene. Never visited her, my aunt was down as next of kin on hospital appointments, collected pension. My aunt didn't want anything but now cousin is in receipt of house. Up for sale at 450k but probate causing issues. He didn't even know her birthday and had to phone my aunt for it.
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The fact that that probate was not taken out on the death of her husband is irrelevant to this case except that it will likely delay this probate to get get it all done now.

She died intestate, and by law her estate passed to her legal next of kin. He/She is entitled to the inheritance regardless of how well they knew her or what the woman had promised.
 
Could any one tell me what is the next step after probate is granted?i would appreciate yere help,
 
noproblem said:
You say the property is still in your fathers name. Does this mean you haven't taken out probate yet? If not, i'm assuming that if you die, your will, leaving your fathers house to one of your children won't mean anything as it's not your property to leave. This would result in a completely different inheritance scenario for your children.
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I am an only child and as my father died intestate under the Succession Act I inherited one third and my Mother inherited the two thirds. My mother left her share to me in her will. I am the sole owner of the house and I want to pass it to my son in the most tax efficient way i.e. Do I will it or transfer it now into my sons ownership? Thanks for advice on this
 
I understand where you're coming from Rosebuds but wonder if the property is legally yours until probate is executed. I'm not a lawyer, just posting the question because of something similar that happened a friend.
 
Just something that came up. An uncle transferred his estate over to the nephew while still alive. A year later the nephew was killed in a car accident with no will made. If the nephew was married then she would be entitled to estate. The uncle now has no say.
 
But the uncle has no say once he hands it over to the nephew anyway? Isn't it just as likely the nephew will do something objectionable as his hypothetical wife..?

The Field was on telly the other night, is that what put this in your head!?:D
 
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