Inheriting property

Moyglish

A retired couple I know have gone sale agreed on a second hand detached home. Currently in the process of closing the sale, it's with the solicitors at this stage.

The couple have one adult son who is currently in receipt of Disability Allowance and there are slim chances of him ever working in any real capacity again.

Adult son doesn't own any property or have any savings, he lives week to week on his disability payment.

He lives at home with his elderly parents and is not in receipt of a rental allowance nor does he have his name down for HAP or social housing with the council or anything like that.

The elderly parents are wondering if they should add his name to the deeds when purchasing the property in order to minimise / avoid any tax issues when they pass on and the house is eventually left to him.

Or they are also wondering if they should just put his name down as the sole owner once the sale goes through?

Would owning a house affect his entitlements to social welfare? He has no other source or income or savings and doesn't own any property and currently lives in the family home.

The family involved have just the one child, no other siblings.

What would be the best course of action in this scenario?

Would it be prudent to have all down as 3 joint owners so the son won't have to pay inheritance tax on the house when the parents die?

The parents also own another property, I. E. The family home, so with 2 houses for the son to eventually inherit he would more than likely be facing a tax bill as the value of both houses would be over the thresholds allowed for passing property from parents to children.

Any implications for being joint 3 owners? Or for having the second house solely in his name?

I presume he would still be entitled to his weekly welfare payment as he has no other assets?

Any other things to consider or be mindful of?

I'm new to all of this and have never dealt with wills or inheritances issues before, just trying to help out some neighbours and give them some good advice going forth.

Anything else to take into consideration?

As he has no savings and is living hand to mouth each week on welfare, there is no way he could pay a hefty tax bill years down the line.

Bicyclette

I personally think this is a bit more complicated than just trying to efficiently and economically attempt to deal with a tax situation.

My recommendation would be to speak with a disability advocate and get independent legal advice for the person with the disability prior to making any decisions.

Does the person with the disability have the capacity to make informed decisions? Are they able to live independently? What happens if one or both parents becomes incapacitated and tough decisions have to be made? Who will make those decisions?

In certain cases, people with disabling conditions can be made wards of court and the courts act in loco parentis for them, when there is no one else to do so. But this may not be the best action in this case.

An opportunity has arisen here to put in place long term plans for the person with the disability and their parents. A legal team will already be on board so it should be easier to manage things now, rather than at a later stage.

Once he remains living with his parents then he will be exempt from CAT in that house anyway leaving him the full 320k group A threashold to use against the other property and any cash left to him.

Naming him on the property now would be considered a gift which would eat into the threashold so it would be a bad idea to do this imo. Better for him to get it as an inheritance and avail of the dwelling house exemption.

Ace2007

Ayan Defeated Pickax wrote: »

Once he remains living with his parents then he will be exempt from CAT in that house anyway leaving him the full 320k group A threashold to use against the other property and any cash left to him.

Naming him on the property now would be considered a gift which would eat into the threashold so it would be a bad idea to do this imo. Better for him to get it as an inheritance and avail of the dwelling house exemption.

that's not true - he can only inherit one house to be exempt from CAT, so in fact in this scenario - he would be paying CAT on the value of the 2 houses + cash assets.

Ace2007

Ace2007 wrote: »

that's not true - he can only inherit one house to be exempt from CAT, so in fact in this scenario - he would be paying CAT on the value of the 2 houses + cash assets.

On checking this you are correct in that you can only inherit one house in order to avail
Of the dwelling house exemption but you can inherit cash with the one house.

You also won’t owe CAT on the value of two house plus cash, it will be value if two house plus cash minus 320k.

Ace2007

Ayan Defeated Pickax wrote: »

On checking this you are correct in that you can only inherit one house in order to avail
Of the dwelling house exemption but you can inherit cash with the one house.

You also won’t owe CAT on the value of two house plus cash, it will be value if two house plus cash minus 320k.

Correct, in fact giving that the couple are retired, and assuming they are 65+, buying the second home especially in this climate is quite a risky move, especially if they see it as a home for the son.

They really should only have one property and the rest of their assets in non property in order to pass the monies on in the most tax efficient manner.

Although if they are willing to explore a loophole and have a smart solicitor/tax advisor then there is a way around this if they want to have the second property, but it's risky as

1. Revenue may challenge it
2. Revenue can change rules and so a "loophole" that exists today, might not be there when they pass, and then a huge tax liability is created.

gipi

The other issue which may arise for the son is that Disability Allowance is a means-tested payment. A large inheritance could have a negative effect on his weekly income (there are some disregards, best to check on www.welfare.ie)

giggs76

gipi wrote: »

The other issue which may arise for the son is that Disability Allowance is a means-tested payment. A large inheritance could have a negative effect on his weekly income (there are some disregards, best to check on

And so it should be, if he is getting a big inhertiance like 2 houses he surely won't be entitled to be getting money from the state

The dwelling house will not be means tested but the extra house and cash will be once it gets over 50k.

So he could inherit the dwelling house and 50k cash without any impact on his disability allowance. It then starts getting reduced as amounts above 50k are on hand.

Spanish Eyes

There is a CAT exemption where the beneficiary is incapacitated and the inheritance is to be used for their medical care and maintenance associated with this.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-exemptions/exemption-for-qualifying-expenses-related-to-physical-or-intellectual-disability/index.aspx

So the son may not have any tax liability given that the Dwelling House Exemption will apply to the house he may inherit from his parents in which he lived, and to the other house and any other assets because of incapacity.

However, IMV a trust should be set up for him in order to ensure he is being maintained and his medical and other needs are met.

Get on to a solicitor and set this up.