Worried about my daughters financial situation

Mommaccamom

Hi All

Looking for thoughts on the following scenario, my brother has been taken into a nursing home and won’t be returning to his home, his house (old but large house in good area) was sitting idle and he suggested to my daughter that she could live in the house along with her partner as they had been looking to buy a house, he has made a will and wants to leave the house to my daughter, my brother never had children of his own. All very decent of him.

My concern comes from the following, my daughter invested approx 15k of her own money into house before she moved in as it wasn’t in great condition, they basically did up up a few rooms in the house and have lived there since approx January, my brother did not want rent only that they pay all bills and for upkeep of house (this is all verbal nothing in writing)

My concern is that as they have no agreement in writing will the Revenue come after my daughter and partner for a large tax bill as they have not been paying rent. How should they approach this from a taxation perspective? Somebody mentioned to me it’s like a caretaker agreement but are these types of agreements acceptable when it comes to Revenue? Should they get one drawn up? Someone else also mentioned getting a low rent agreement done up with my brother and put it at 6k per year which is what he can gift them tax free so they don’t actually pay him anything but again is this acceptable to the tax man? I should also say because of previous gifts from my brother to my daughter she has exhausted her 32k treshold so anything now gifted is at 33%

The house if it was in top condition would fetch approx 3500 per month, I am just worried that they are walking into a large bill down the line that they don’t see coming.

Would be grateful for any thoughts?

Mommaccamom

Any thoughts at all on this, sorry, just worried they could get themselves into trouble with Revenue, thanks

banie01

Mommaccamom wrote: »

Any thoughts at all on this, sorry, just worried they could get themselves into trouble with Revenue, thanks

Regarding the rent and incurring a CGT liability, perhaps look at getting a carekeeper agreement in place.
This will specify maintenance and care of the property in lieu of rent.

On inheritance of the property, your daughter will incur a CGT liability.
This can be mitigated and also there may be a claw back or lien on her uncle's estate for any care that was provided as part of a fair deal package.

The person best placed to advise on mitigating the tax bill is a qualified Tax Advisor.

I would add that whatever demand is made by revenue, your daughter is living rent free and the advice should be to save the rent cost as a sinking fund to allow any tax demand be met with quick settlement and reduce penalties.

adam88

I’d defo sit down and pay for a tax advisor in this situation. From a very quick look at it she’s liable to a tax bill when he passes away. Plus fair deal will want their share of the house as well

niallb

adam88 wrote: »

... fair deal will want their share of the house as well...

Are fair deal involved at all?
Even if they are, if his savings were sufficient, there may not yet have been a need to take out the nursing home loan.
The amount to pay per week is calculated based on the value of the home and savings, but does not have to be paid by giving them the house.

893bet

In the absence of children does the “favourite niece” rule apply?

Mommaccamom

banie01 wrote: »

Regarding the rent and incurring a CGT liability, perhaps look at getting a carekeeper agreement in place.
This will specify maintenance and care of the property in lieu of rent.

On inheritance of the property, your daughter will incur a CGT liability.
This can be mitigated and also there may be a claw back or lien on her uncle's estate for any care that was provided as part of a fair deal package.

The person best placed to advise on mitigating the tax bill is a qualified Tax Advisor.

I would add that whatever demand is made by revenue, your daughter is living rent free and the advice should be to save the rent cost as a sinking fund to allow any tax demand be met with quick settlement and reduce penalties.

Thanks so much for all the replies, very helpful, I think the caretaker agreement is the way to go for them however I’m unsure if that would be acceptable to Revenue? Do you think putting in a call to Revenue would help? Also I should say fair deal scheme does not apply in this case

barneystinson

Mommaccamom wrote: »

Thanks so much for all the replies, very helpful, I think the caretaker agreement is the way to go for them however I’m unsure if that would be acceptable to Revenue? Do you think putting in a call to Revenue would help? Also I should say fair deal scheme does not apply in this case

Revenue aren’t in the tax advice business; this is a job for a competent tax advisor.