Parents' will - transfer of property

Porkpie

I own an apartment, with 22 years left on the mortgage. My parents’ plan for their will is to leave me their house (mortgage has been paid off) and for me to give my apartment to my brother. My brother would be happy with this deal as a big house would not suit him. My parents are both in their late seventies and would like to make this change to their will asap but are not sure how to go about it so I'm enquiring on their behalf. Both myself and my brother are in our thirties and single.

While it might sound like a simple idea in principle I’m sure it’s probably not so straight forward. Does anyone know a) is this feasible and b) what’s involved, i.e. possible taxes, fees, would we have to go to a solicitor etc. I heard that it might be possible to transfer my mortgage from my apartment to my parents’ house.

I’m clueless about this whole thing and any advice would be greatly appreciated.

Thanks.

Michael D Not Higgins

This sounds very messy from a tax point of view. I'd suggest getting some professional advice on this, both legally and tax wise.

The problem I'd see is if your parents give you the house, it might be above the CAT limit of 310k, and you'd pay 33% tax on anything over that. Also, you gifting the apartment to your brother would attract CAT for him above 32.5k.

How it might work is if your parents each gift half the house to you and your brother and then your brother sells you his half and you sell him your apartment. This is likely to be the most tax efficient but could get messy financially and legally so worth doing some homework with the professionals first.

Michael D Not Higgins

Something to consider also is the cost difference between half your parents house and your apartment. For example, say your parent's house is worth 500k, you each inherit 250k worth. Your apartment is worth 200k with mortgage of 150k left on it. Your brother sells his half for 250k buys your apartment for 200k and is left with 50k in cash and no mortgage. You get 50k from the apartment sale and have to buy 250k of house so effectively increasing your mortgage by 50k to 200k.

Mrs OBumble

Three words: professional advice needed.

Porkpie

Michael, thanks for your replies, I had to read your second message a few times to get my head around it!

That makes sense but you're right, it would be worth seeking professional advice - Mrs OBumble, will do.

The_Conductor

From a tax perspective- you can no longer swap property without triggering CAT/CAG on transaction for both parties- along with all the other charges.

Also- what happens if one or both of your parents need nursing home care (not unusual)? The Fair-Deal scheme can eat up to 22.5% of the PPR- which is the house that you are proposing to take on. Transferring it you now- doesn't do anything either- any assets your parents have in the 5 years prior to any application for nursing home care- are counted- so if there is any income or assets that your parents voluntarily deprive themselves of- they get counted.

You do need proper tax advice- but your parents also need to contact agencies such as 'Age Action' to try to get a better idea of the reprecussions of their actions- wholly aside from the tax implications of what they are proposing- there are also other implications- such as providing for their future care and needs.

How would you be set- if you had to fund 22.5% of the market value of your parents home- on top of your current mortgage- and the tax implications of the whole proposal.

There are too many different transactions- all attracting costs, taxes and other charges- happening here.

By rights- you and your brother need separate independent advice on this too.

It is nowhere near as straight forward as your parents are suggesting.

4ensic15

Porkpie wrote: »

I own an apartment, with 22 years left on the mortgage. My parents’ plan for their will is to leave me their house (mortgage has been paid off) and for me to give my apartment to my brother. My brother would be happy with this deal as a big house would not suit him. My parents are both in their late seventies and would like to make this change to their will asap but are not sure how to go about it so I'm enquiring on their behalf. Both myself and my brother are in our thirties and single.

While it might sound like a simple idea in principle I’m sure it’s probably not so straight forward. Does anyone know a) is this feasible and b) what’s involved, i.e. possible taxes, fees, would we have to go to a solicitor etc. I heard that it might be possible to transfer my mortgage from my apartment to my parents’ house.

I’m clueless about this whole thing and any advice would be greatly appreciated.

Thanks.

It is easy to do. Your parents will thye house to you on condition you transfer the apartment to your brother. So far so good. There are however too many variables. If you have an outstanding mortgage, the mortgage will have to be cleared. You may or may not get a mortgage on your parents house when the time comes. The simplest thing for your parents to do is leave the main hose between you and you brother. You can then sell your apartment to him for his half share of the house if you both are of a mind to.

The_Conductor

4ensic15 wrote: »

It is easy to do. Your parents will thye house to you on condition you transfer the apartment to your brother. So far so good. There are however too many variables. If you have an outstanding mortgage, the mortgage will have to be cleared. You may or may not get a mortgage on your parents house when the time comes. The simplest thing for your parents to do is leave the main hose between you and you brother. You can then sell your apartment to him for his half share of the house if you both are of a mind to.

Tax implications of this- are significant- and it doesn't address the needs of the parents, should they need nursing home or other care in their dotage.......

4ensic15

The_Conductor wrote: »

Tax implications of this- are significant- and it doesn't address the needs of the parents, should they need nursing home or other care in their dotage.......

If Fair deal comes out of it, they just get the net amount from the estate. The house is being left by will. A will is ambulatory so it doesn't matter until the last parent dies. A 50/50 split of assets is all the parents need to do. If the o/p and his brother want to make arrangements between themselves at that stage they can do so, taking into account taxation issues and the respective market values and the feasibility of borrowing at that point. If the o/p and his brother are over 50 by the time the last parent dies, borrowing may be difficult or impossible. .

The_Conductor

How old are the parents now- and how likely are they to need access to some of the equity here?

davindub

Tax advisor really, for example beyond the lifetime threshold from your parents, you might look up dwelling CAT exemption and see if it something you do, you would need to live in the house for 3 years before transfer
but there are a few other conditions.

Zenify

if you live in your parents house and don't own any other property you won't have to pay tax. This is a tax law to prevent you from having to sell your home to pay the tax bill.

it's been a while since I studied tax but I think you need to live in the house for 3 years before they die. it's something to consider if you could give the house to your brother now (another tax story).

Ghekko

The_Conductor wrote: »

How old are the parents now- and how likely are they to need access to some of the equity here?

Parents are late 70's. Are they in good health? I too would take nursing home into consideration just in case. Supposing your parents had a fund (current savings and regular pension) to pay their way in a nursing home while availing of the fair deal, then the house won't be affected when they die. However if the house is worth a fair bit and they are living on state pensions then they may need to go the route of the loan scheme so the house will be tied up in that. I do think the simplest way is for them to split their estate 50/50 and let ye sort things out between ye when the time comes. Not wanting to be negative but who knows how your sibling relationship will pan out in the future. If ye fell out how would your parents wishes work? Dh and his sibling fell out when their remaining parent was terminally ill. No going back. Parent died and the will was sorted via solicitors. They haven't spoken in a few years. Nobody could have foreseen that a few years ago though. Also supposing your sibling married/moved abroad and was settled by the time your parents died. You might be stuck with the house and apartment and him looking for hard cash instead. There are too many ways this could get messy. Your parents could well live another 15 years or more so things could change a lot in that time.
Other than that it's great your parents are talking about it with you and not burying their heads in the sand.

The_Conductor

The_Conductor wrote: »

From a tax perspective- you can no longer swap property without triggering CAT/CAG on transaction for both parties- along with all the other charges.

Also- what happens if one or both of your parents need nursing home care (not unusual)? The Fair-Deal scheme can eat up to 22.5% of the PPR- which is the house that you are proposing to take on. Transferring it you now- doesn't do anything either- any assets your parents have in the 5 years prior to any application for nursing home care- are counted- so if there is any income or assets that your parents voluntarily deprive themselves of- they get counted.

You do need proper tax advice- but your parents also need to contact agencies such as 'Age Action' to try to get a better idea of the reprecussions of their actions- wholly aside from the tax implications of what they are proposing- there are also other implications- such as providing for their future care and needs.

How would you be set- if you had to fund 22.5% of the market value of your parents home- on top of your current mortgage- and the tax implications of the whole proposal.

There are too many different transactions- all attracting costs, taxes and other charges- happening here.

By rights- you and your brother need separate independent advice on this too.

It is nowhere near as straight forward as your parents are suggesting.

On the other hand if they won't need nursing home care in the next 5 years it's very smart to get all assets out of their name. I'd encourage anyone to minimise their worth by gifting it to their children in order to avail of the benefits their tax paid for over the years rather than having to fork out again from their hard earned money.

fishy_fishy

On the CAT thing, because the house would be in return for his apartment, the value of the gift/inheritance is the value of the parents' house less the value of his own apartment.

The brother receives the apartment from the parents, not from the OP. So for the brother the threshold is for Group A (parents), not Group B (siblings).

In terms of CGT, assuming they've been living in the dwellings then the PPR relief should be available. Stamp duty avoidable if it all transfers on death.

However, you absolutely need legal and tax advice specific to your family. And if you are leaning towards this idea, you should get advice independently from your parents.

There are also some fair points raised about planning for their future care needs, and I think it would be wise to go through the scenarios with someone who is familiar with the system. Age action were mentioned earlier, and they could be good. Citizens advice might also be worth a shot.

The_Conductor

You can't just swap properties- even if they are of a commensurate value.
You were able to do precisely this- up to about 15 years ago- unfortunately, for whatever reason, the government/revenue commissioners (aka Charlie McCreevy) decided this was not something they were willing to countenance any longer.

4ensic15

The_Conductor wrote: »

You can't just swap properties- even if they are of a commensurate value.
You were able to do precisely this- up to about 15 years ago- unfortunately, for whatever reason, the government/revenue commissioners (aka Charlie McCreevy) decided this was not something they were willing to countenance any longer.

You can swap properties but must now pay stamp duty. The parents are proposing to dispose of the property by will, that is, after they die. they are not giving anything away now. No one knows what the situation will be by the time the last parent dies.

fishy_fishy

The_Conductor wrote: »

You can't just swap properties- even if they are of a commensurate value.
You were able to do precisely this- up to about 15 years ago- unfortunately, for whatever reason, the government/revenue commissioners (aka Charlie McCreevy) decided this was not something they were willing to countenance any longer.

Never said they would be swapping. The OP would be gifted/would inherit his parents house in consideration for his apartment being transferred to his brother. The parents are the source of both dwellings. The OP is not gifting the apartment to his brother, he's transferring it to enable him to receive another gift/inheritance, and so the parents are the source of the movement of the apartment to the brother.

4ensic15

fishy_fishy wrote: »

Never said they would be swapping. The OP would be gifted/would inherit his parents house in consideration for his apartment being transferred to his brother. The parents are the source of both dwellings. The OP is not gifting the apartment to his brother, he's transferring it to enable him to receive another gift/inheritance, and so the parents are the source of the movement of the apartment to the brother.

The parents don't own the o/ps apartment. He does. Stamp duty will have to be paid by the o/p on the house and by his brother on the apartment. There are gift tax considerations as well. The whole business is being made needlessly complicated.

The_Conductor

4ensic15 wrote: »

The parents don't own the o/ps apartment. He does. Stamp duty will have to be paid by the o/p on the house and by his brother on the apartment. There are gift tax considerations as well. The whole business is being made needlessly complicated.

The OP would also have CGT @ 33% on the apartment......... I.e. any gain in the value of the unit- since he bought it, would be charged at 33% (unless the purchase date fell within a CGT assistance scheme such as the 11.12.2011-31.12.2014)

The series of transactions that the OP is suggesting- are extremely convoluted- and costly- for all concerned (with the possible exception of the OP's brother).

The_Conductor

The_Conductor wrote: »

The OP would also have CGT @ 33% on the apartment......... I.e. any gain in the value of the unit- since he bought it, would be charged at 33% (unless the purchase date fell within a CGT assistance scheme such as the 11.12.2011-31.12.2014)

The series of transactions that the OP is suggesting- are extremely convoluted- and costly- for all concerned (with the possible exception of the OP's brother).

It it has always been his PPR it's exempt from CGT regardless of when it was bought.

Humour Me

In relation to your apartment, your bank will not allow the transfer of the deeds to your brother unless the mortgage is paid off in full. You could end up living in your parents home (which would then be your PPR) while paying the mortgage on the apartment your brother is living in (would you charge him rent?)

Any increase in value from the date your PPR changes will be subject to capital gains tax when you eventually sell the apartment or transfer the deeds when the mortgage is cleared.

You all need independent advice on the legal and financial implications of what is being proposed. As the person in the middle of both property transactions, the risks seem to be falling on you.

Spanish Eyes

I am firmly of the view that unless there are unbearable sentimental issues WRT family home (FGS, but there can be), If I were the parent, I would direct the house to be sold and the proceeds divided equally between the two brothers.

Brother one (with the apartment) could pay off his mortgage, or do what he wishes, Brother two could buy a small property or get a mortgage with a hefty deposit, or blow the lot.

The scenario outlined is very complex and open to subsequent issues way beyond what the parents possibly want to happen.

Simple is best.

beauf

WRT FGS?

Spanish Eyes

beauf wrote: »

WRT FGS?

With Regard To

For God's Sake,

do you not know the shortcuts already! I bet you do.....

Frank Grimes

beauf wrote: »

WRT FGS?

With regard to - I'm not sure about the other one.

Spanish Eyes

Spanish Eyes wrote: »

I am firmly of the view that unless there are unbearable sentimental issues WRT family home (FGS, but there can be), If I were the parent, I would direct the house to be sold and the proceeds divided equally between the two brothers.

Brother one (with the apartment) could pay off his mortgage, or do what he wishes, Brother two could buy a small property or get a mortgage with a hefty deposit, or blow the lot.

The scenario outlined is very complex and open to subsequent issues way beyond what the parents possibly want to happen.

Simple is best.

You can't discount the attachment people have to their home. I wouldn't sell the home house for anything.

beauf

I have no idea why you used FGS.

Our family home, when there's no one left in it, I will encourage it to be sold. Because the siblings will always feel they have a bond with it, even if they do not own it. They will never agree to clear it out either, unless its sold. Personally I would want a financial clean break from the siblings. The Tax bill will usually force a house to be sold. I think the days of people being able to afford to say where they grew are disappearing. People can't downsize as theres nothing suitable to downsize too.

That said I've encouraged the parents to make themselves as comfortable as they can.

Spanish Eyes

Casen Gentle Somewhat wrote: »

You can't discount the attachment people have to their home. I wouldn't sell the home house for anything.

I did mention sentimentality in all this.

But practicality and the avoidance of inter family squabbles might mean selling. Are you the only child by any chance? If not I doubt it will be your decision alone anyway.

The process of "buying out" other beneficiaries can be a nightmare. Heart over head.

Spanish Eyes

Spanish Eyes wrote: »

I did mention sentimentality in all this.

But practicality and the avoidance of inter family squabbles might mean selling. Are you the only child by any chance? If not I doubt it will be your decision alone anyway.

The process of "buying out" other beneficiaries can be a nightmare. Heart over head.

Not an only child but the house is part of a farm with sheds and potentially my own house built right next door also along with other relations houses very close by too. Ferm will obviously never be sold so neither would the house.

Spanish Eyes

beauf wrote: »

I have no idea why you used FGS.

Our family home, when there's no one left in it, I will encourage it to be sold. Because the siblings will always feel they have a bond with it, even if they do not own it. They will never agree to clear it out either, unless its sold. Personally I would want a financial clean break from the siblings. The Tax bill will usually force a house to be sold. I think the days of people being able to afford to say where they grew are disappearing. People can't downsize as theres nothing suitable to downsize too.

That said I've encouraged the parents to make themselves as comfortable as they can.

I used FGS because some people's sentimentality outweighs practicality, sometimes of course. FGS why?

Take loads of pictures, get yourselves all together for one last shindig in the home place, and move on.

A clean break and a benefit to everyone without any hassle can be a good outcome too.

I don't discount the attachment many will have to the "home place", but do many people want to live in that place anymore? I doubt it. But maybe they do. Therein lies the problem. One person wants to keep the house, the rest want their inheritance. Sounds heartless, but often that is the reality. People's lives may have moved off in different directions, abroad even, and in another town/city in Ireland.

But I am not making any judgments, although it might have come across like that.

Spanish Eyes

Casen Gentle Somewhat wrote: »

Not an only child but the house is part of a farm with sheds and potentially my own house built right next door also along with other relations houses very close by too. Ferm will obviously never be sold so neither would the house.

Farms. The Field, I get it.

I'm coming at it from a city person's point of view.

Is such sentimentality practical though? I dunno. You have a different perspective to mine obviously. Will your family/siblings/beneficiaries be happy with that? Maybe they will.

Spanish Eyes

Spanish Eyes wrote: »

Farms. The Field, I get it.

I'm coming at it from a city person's point of view.

Is such sentimentality practical though? I dunno. You have a different perspective to mine obviously. Will your family/siblings/beneficiaries be happy with that? Maybe they will.

never said I'd be the one getting the house, especially as I'm an only son so the farm would be the more obvious thing I'd be taking over.

Spanish Eyes

Casen Gentle Somewhat wrote: »

never said I'd be the one getting the house, especially as I'm an only son so the farm would be the more obvious thing I'd be taking over.

Never count your chickens....

Ah we are only having a bit of banter, with a lot of practical issues thrown in the mix for those who may not realise the contention of the division of assets depending on the wording of a will.

fepper

Casen Gentle Somewhat wrote: »

never said I'd be the one getting the house, especially as I'm an only son so the farm would be the more obvious thing I'd be taking over.

You said you'd never sell the home house which happens to be on the farm that you'll probably own at some stage but if another sibling gets the house on the farm,isn't is out of your hands if the house is sold to a complete stranger

beauf

I know one couple who built adjoining the parent and sibling house/farm. Now they've split up. They'll probably club together to buy the other party out.

I built my parents house with my father. But I can just see hassle trying to buy out the siblings.

fepper

fepper wrote: »

You said you'd never sell the home house which happens to be on the farm that you'll probably own at some stage but if another sibling gets the house on the farm,isn't is out of your hands if the house is sold to a complete stranger

Everyone is very similar frame of mind so would never be sold unless except within the family. Even form a practical point the house is part of the farm hard to see a stranger accepting people waking around their back yard which is where some sheds are located. They would have zero privacy.

Spanish Eyes

Farmer/culchies. Never give in. Will always be ours no matter what.

I see a pattern here lol.

fepper

Casen Gentle Somewhat wrote: »

Everyone is very similar frame of mind so would never be sold unless except within the family. Even form a practical point the house is part of the farm hard to see a stranger accepting people waking around their back yard which is where some sheds are located. They would have zero privacy.

thats my point about the house on the farm,it really is part of the farm especially in older farm yards but the present day farmer tends to build well away from farmyard now and could easily be given to another family member and sold on if they wished