Parents to Inherit house - Cant pay CAT, what to do?

One More Toy

FYI, they will probably have to go to a tax accountant but Im just posting out of curiosity to see is there anything that can be done. Im an auditor, but know very little about personal tax.

Parents due to inherit house conservitively valued at 300,000 (was 500,000 during the boom :O )

Leaving approx 100,000 CAT liability (its from my mothers aunt). Aunt always expressed she didnt want to have the house sold after her death, but its gonna be very hard for my parents to pay that!

So I guess my question is, is there any way of reducing the CAT? Could I lend them the money tax free in order to keep the house?

This is causing my parents a great deal of worry so any advice would be appreciated at this stage!

adrianw

Of course you could lend them the cash, if you have €100,000 to spare.

The tax free element of the loan would of course be deemed a gift from you to them, but would most likely be covered by the annual threshold.

CAT cannot be reduced as the event has already occurred.

One More Toy

adrianw wrote: »

Of course you could lend them the cash, if you have €100,000 to spare.

The tax free element of the loan would of course be deemed a gift from you to them, but would most likely be covered by the annual threshold.

CAT cannot be reduced as the event has already occurred.

Sugar! Guess I will be lending them the majority of it so, not so much the revenue's fault but due to the fears of mom and dad that they will be haunted from beyond the grave!

Spanish Eyes

Could they sell their own house and move into the one inherited, pay off the CAT and any other debts, and maybe refurbish the inherited house if that is necessary, with the proceeds of own house?

If I inherited a house with a huge tax bill that is what I would do, either sell my own or the inherited one. And I understand the sentimental attachment to the aunt's house, but sometimes practicalities have to be overcome.

Spanish Eyes

adrianw wrote: »

Of course you could lend them the cash, if you have €100,000 to spare.

The tax free element of the loan would of course be deemed a gift from you to them, but would most likely be covered by the annual threshold.

CAT cannot be reduced as the event has already occurred.

A gift from child to parent is around €30k threshold. Same for inheritance from a child, except in certain circumstances. So be careful!

However, the annual interest that would have been charged on the interest free loan is the amount assessed for CAT, so it may be ok.

seamus

What age are they? Would a bank give them a mortgage to cover it? That's typically what people do.

One More Toy

Thanks for all the replies!

RE: moving, probably not an option, all three kids are now grown ups, and the inherited house is a quasi-mansion, way to big for the old folks to maintain, even to heat the bloody place in the winter would be a nightmare. Coupled with the fact I doubt they would sell their home, damn sentimentality!

So if all three kids gifted 30,000 it may just cover the vast majority. Either that or a mortgage. But, im not sure they would get one, as they have an investment property and a mortgage on that too

Alan Shore

I don't get this "I want to leave you my house but you are not to sell it", is it an Irish thing?

Is the aunt still alive? What can the parents do with the asset. Do they have a child that they could give the house to?

If so the child should move in with their grand aunt for 3 years and then the aunt should give the house to the grandniece/nephew.

adrianw

Alan Shore wrote: »

I don't get this "I want to leave you my house but you are not to sell it", is it an Irish thing?

Is the aunt still alive? What can the parents do with the asset. Do they have a child that they could give the house to?

If so the child should move in with their grand aunt for 3 years and then the aunt should give the house to the grandniece/nephew.

Does that work Alan? How strict are Revenue in relation to the individual gifting the house to be infirm and be reliant on the individual who will inherit the house? Is it a case of once you are over 65 you must be in need of assistance?
Thanks

Spanish Eyes

One More Toy wrote: »

Thanks for all the replies!

RE: moving, probably not an option, all three kids are now grown ups, and the inherited house is a quasi-mansion, way to big for the old folks to maintain, even to heat the bloody place in the winter would be a nightmare. Coupled with the fact I doubt they would sell their home, damn sentimentality!

So if all three kids gifted 30,000 it may just cover the vast majority. Either that or a mortgage. But, im not sure they would get one, as they have an investment property and a mortgage on that too

No.... €30k is the TOTAL amount of the threshold (lifetime) for each parent WRT a gift from a child.

Anything over that is taxed.

Sell the flippin mansion. Enjoy the money and live it up, no worries.

hmmm

Sell the house. What are they hanging on to it for?

Spanish Eyes

We are talking about an inheritance here I believe, so aunt must be deceased.

The Dwelling House Exemption only applies if the beneficiary has lived in the house owned by the deceased for at least three years and does NOT own any other house.

Gifts have get out clauses which mean that the three year occupancy rule is null and void where the house that the recipient is living in is the main residence of the owner.

seamus

adrianw wrote: »

Does that work Alan? How strict are Revenue in relation to the individual gifting the house to be infirm and be reliant on the individual who will inherit the house? Is it a case of once you are over 65 you must be in need of assistance?
Thanks

Funnily enough...
http://www.revenue.ie/en/tax/cat/leaflets/cat10.html

Any period during which a donee occupies a house that was during that period the disponer's only or main residence will be disregarded as a period of occupation in that house unless the disponer is compelled, by reason of old age or infirmity, to depend on the services of the donee for that period. Old age refers to a person aged 65 or over.

That would seem to me to indicate that provided the owner is at least 65, you can claim that they're dependent on the younger person's services.

I wonder how strict Revenue are on that one.

Spanish Eyes

hmmm wrote: »

Sell the house. What are they hanging on to it for?

Aunty will haunt them if they do.

Spanish Eyes

seamus wrote: »

Funnily enough...
http://www.revenue.ie/en/tax/cat/leaflets/cat10.html

That would seem to me to indicate that provided the owner is at least 65, you can claim that they're dependent on the younger person's services.

I wonder how strict Revenue are on that one.

Old age is over 65. That can be easily proven, as can infirmity. So just provide the details to Revenue if required.

But this option is not available in relation to the aunt's house.

It could be worked if the parents take the house, live there, and reach the age of 65 and have some or all their children living there with them after that age, who have stayed for at least 3 years and don't own another house.

I don't this it is relevant to this topic.

One More Toy

Spanish Eyes wrote: »

Aunty will haunt them if they do.

Haha, this is exactly it!!!