Transfer of family home to children

deebee08

Hi,

I wonder if anyone familiar with family transfers etc could help me.

My parents want to gift their house to myself and my brother so 2 questions:

1) We will have a gift tax exemption of around €300k each before liable to gift tax, is this right?
2) I will be living there but my brother lives in the UK so if myself and my partner wanted to buy my brother out at some stage in the future, what will be the tax implications for him? Will he be liable to pay stamp duty or anything and how much?

Thanks.

Spanish Eyes

1. Yes you have that tax free amount provided you haven't taken any gifts previously from parents, as that amount is a lifetime tax free threshold. Any prior gifts taken would erode that amount. And don't forget, if you are left anything from parents' estate, anything taken by gift reduces the tax free threshold also.

2. Why would you and partner be buying out the brother if the half share is transferred to you only? Get legal advice on transferring a share to partner before buying brother out. Could be very costly.

Stamp duty will be payable by you as transferee if you buy him out. 1% up to 1m euro. There could be a CGT issue WRT to brother if the house is not his PPR and he sells/transfers his share to you.

Get advice. I could be spoofing!

deebee08

Spanish Eyes wrote: »

1. Yes you have that tax free amount provided you haven't taken any gifts previously from parents, as that amount is a lifetime tax free threshold. Any prior gifts taken would erode that amount. And don't forget, if you are left anything from parents' estate, anything taken by gift reduces the tax free threshold also.

2. Why would you and partner be buying out the brother if the half share is transferred to you only? Get legal advice on transferring a share to partner before buying brother out. Could be very costly.

Stamp duty will be payable by you as transferee if you buy him out. 1% up to 1m euro.

Thanks for that. My parents would be transferring the house to myself AND my brother and then myself and my partner plan to buy him out of his share.

Spanish Eyes

deebee08 wrote: »

Thanks for that. My parents would be transferring the house to myself AND my brother and then myself and my partner plan to buy him out of his share.

Yes I get that the gift is to you and your brother. The problem lies with why you and your PARTNER would be planning to buy him out if your partner has no interest (legally I mean) in the house? I take it your parents are not gifting any interest in the house to your partner?

Can you explain that to me? Thanks.

deebee08

Spanish Eyes wrote: »

Yes I get that the gift is to you and your brother. The problem lies with why you and your PARTNER would be planning to buy him out if your partner has no interest (legally I mean) in the house? I take it your parents are not gifting any interest in the house to your partner?

Can you explain that to me? Thanks.

Because it means that:
1) My brother will get his inheritance out of it from us buying him out.
2) My partner will have a bit of security. We plan on moving into the house with our 2 kids and have it as our family home. If we don’t buy my brother out and anything happened to me my brother could (he wouldn’t) kick my partner out and sell the house leaving him and my 2 kids homeless. My brother has no intention of ever moving back to Ireland.

Spanish Eyes

deebee08 wrote: »

Because it means that:
1) My brother will get his inheritance out of it from us buying him out.
2) My partner will have a bit of security. We plan on moving into the house with our 2 kids and have it as our family home. If we don’t buy my brother out and anything happened to me my brother could (he wouldn’t) kick my partner out and sell the house leaving him and my 2 kids homeless. My brother has no intention of ever moving back to Ireland.

Fine, but YOU need to buy your brother out on your OWN. There is no other way to do it unless you transfer a quarter share to your partner before you both buy out the brother, and that will result in a huge Gift Tax bill from you to her.

I know it sounds judgmental, I don't mean it, but you should just buy out the brother on your own, or either get MARRIED to partner and then transfer half to her. No tax whatsoever on that transaction once she is a spouse.

Just be careful of the tax implications in what you are saying about you and partner buying your brother out. That's all I'm saying. Best of luck, and keep the faith.

There are ways to minimise tax. Your way doesn't seem to be one of them when partner is involved.

But I could be spoofing. I'm not. Your partner will have no rights at all unless you transfer a share to her. OK she might take you to the cleaners at a later point if you are living together and she is contributing, but there is no absolute right.

Get LEGAL ADVICE. The Legal advice will include taxation advice. Money very well spent.

Remember, despite my best intentions, your scenario is not all that clear, but I have done my best with the limited information supplied.

Peregrinus

Spanish Eyes wrote: »

Fine, but YOU need to buy your brother out on your OWN. There is no other way to do it unless you transfer a quarter share to your partner before you both buy out the brother, and that will result in a huge Gift Tax bill from you to her.

No, that's not the only way. If the OP does as suggested he will end up with a 75% share in the house (50% gifted to him, 25% bought from his brother) and his partner will end up with a 25% share (bought from her brother-in-law).

This doesn't involve any gift to the partner, so no gift tax (over and above what is paid on the gift from the parents, of course). The stamp duty consequences are the same as if the OP bought the full 50% share from his brother on his own.

The question that nobody is asking is, what shares do the OP and his partner wish to own the house in? It's impossible to suggest a strategy for achieving their objective until we know what their objective is.

You are correct to point out that the tax consequences do depend significantly on whether the OP and his partner are married or not. The other relevant question is what is to become of the parents. Will they continue to live in the family home, and on what terms?

exaisle

It's probably important to note that if your brother is bought out on the same day as the house is transferred, then there will be no CGT owed, as the valuation will stand for both transactions...

+1 to Peregrinus above.

Mr. Incognito

You will have to take professional advice on this.

exaisle

Mr. Incognito wrote: »

You will have to take professional advice on this.

There's a way of reducing the erosion of the your Class A CAT threshold by utilising the Class C threshold which your partner has, if your parents gift a percentage of the house to your partner equal to €16250 and gift 50% of the value of the house less €16250 to you. This assumes that your partner hasn't received any gifts or inheritances from any person who falls into the Class C criteria (most close relatives are in class A and . It also assumes that your parents are happy to do so!

It may make no difference whatever, but it may save you €5k odd at some point in the future...if your parents leave you something in their will...