Inheritance Tax Query - Joint Tenants

sten_gun

Hi,

Quick theoretical question on Joint tenants as a means of tax efficient inheritance.

Suppose if a parent and child were to purchase a property together, holding the title as Joint tenants, then it appears that upon the death of the parent, the child would take the asset free of Inheritance tax. The following document doesn't deal with that instance exactly, but it seems to be implied:

3 wubbleyous .revenue.ie/en/about/foi/s16/income-tax-capital-gains-tax-corporation-tax/part-19/19-03-07.pdf

So why isn't everyone setting up Joint tenancy with their children instead of doing the whole wills, probate and tax thing? Am I missing something?

Mr. Incognito

because you pay tax on the transfer to the joint tenant and then have another tax hit when its transferred out of the joint tenancy.

So kid dies. Boom, tax hit to parent. The kids will leaves everything to spouse and kids.

Boom. Tax hit parent to son in law, tax hit grandparent to grand children.

Very expensive and risky from tax perspective.

share_bear

Mr. Incognito wrote: »

because you pay tax on the transfer to the joint tenant and then have another tax hit when its transferred out of the joint tenancy.

So kid dies. Boom, tax hit to parent. The kids will leaves everything to spouse and kids.

Boom. Tax hit parent to son in law, tax hit grandparent to grand children.

Very expensive and risky from tax perspective.

Giving a joint tennancy to a child free of charge might incur taxes (although I don't know that for sure).

But consider where a child sells his own house, and parent sells her own house, and they pool their money and buy together as a joint tennancy - surely that avoids inheritance tax?

nompere

There's an inheritance when one of the co-owners dies and the other acquires that share by survivorship.

dogsears

share_bear wrote: »

Giving a joint tennancy to a child free of charge might incur taxes (although I don't know that for sure).

But consider where a child sells his own house, and parent sells her own house, and they pool their money and buy together as a joint tennancy - surely that avoids inheritance tax?

Buying something together as joint tenants is an OK idea because it can pass by survivorship on death on one of them instead of going through the estate etc. (assuming the parent dies first - reasonable enough - and that the child is the person the parent wants to receive the benefit of their share of the property on their death - which may take a bit of thought and balancing out in relation to what any other children are to get under a will etc).

But there's no particular tax advantage.

share_bear

dogsears wrote: »

Buying something together as joint tenants is an OK idea because it can pass by survivorship on death on one of them instead of going through the estate etc. (assuming the parent dies first - reasonable enough - and that the child is the person the parent wants to receive the benefit of their share of the property on their death - which may take a bit of thought and balancing out in relation to what any other children are to get under a will etc).

But there's no particular tax advantage.

But joint tennancy means they both fully own , not that they each own a share.
Each already owns an undivided interest in the whole, so surely the survuvng tennants isn't gaining anyhing taxable, merely the deceased persons interest in it goes away...? Lets assume its an only child.

dogsears

share_bear wrote: »

But joint tennancy means they both fully own , not that they each own a share.
Each already owns an undivided interest in the whole, so surely the survuvng tennants isn't gaining anyhing taxable, merely the deceased persons interest in it goes away...? Lets assume its an only child.

Indeed.

Nevertheless an inheritance is taken by the surviving joint tenant for taxation purposes as pointed out above. Its provided for in legislation. Section 13 CAT Consolidation Act 2003 if you want to check it out.