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Putting a house into joint names of parent and adult child

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  • 27-10-2019 11:27pm
    #1
    Fistycuffs
    Registered Users Posts: 305 ✭✭


    I'm helping an elderly neighbour and his son out at the moment as he is unwell. His son is living with him as a carer and he wants to put the house in their joint names.

    Would he need an auctioneer to value the house before they do that?

    How much would a solisitor cost on average to do a job like this?

    Even a rough estimate of what might be expected would be a help. Its a sad situation, I won't go into details but there are genuine reasons why it would be a good idea for them, but they really have no clue about this sort of thing. They didn't even realise they needed a solisitor and instead asked in the bank!


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    #2
    coylemj
    Registered Users Posts: 25,344 ✭✭✭✭coylemj


    Is this being done in an attempt to disinherit other siblings or to avoid inheritance (Capital Acquisition) tax? Or to establish the son's right to stay living in the house after your neighbour dies?

    Your neighbour is effectively planning to gift half his house to his son which could give rise to a tax liability, the solicitor's fees might be the least of his troubles. Though as a son, he could receive cash or property from the parent up to the value of €335K (since Oct 9th 2019) with no liability to CAT. That is a lifetime threshold so if the father died in a few years time and left him the remainder of the house, he couldn't use that threshold again but could use any unused amount from the original gift.

    Say the house is worth 400K. The son could be gifted half of it (worth 200K) now and pay no CAT. In a year's time, the father dies and leaves him the other half of the house (still 200k), the son would then be liable to pay CAT on 65K (200K inheritance minus the unused 135K from the exemption threshold).

    You said the son is the father's carer but if he could be classed as a dependant of his father, there may be a way of gifting or bequeathing the house to him with no liability to CAT, see this Revenue document...

    Dwelling House Exemption

    Bear in mind that even if the son owns half the house when his father dies, it doesn't mean he can stay put and deny his siblings their inheritance(s) if they are left the remainder of the house in their father's will. The son would need cash to buy them out or they could force him to sell the house.

    This could be about a lot more than putting his name on the deeds. With lots of opportunity for family conflict in the bargain.


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    #3
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    What siblings?


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    #4
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    If you are a joint owner it will simplify the legal transition.

    It can also be a means to keep the house out of the fair deal.

    You can't avoid the tax whatever way it's done.


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    #5
    coylemj
    Registered Users Posts: 25,344 ✭✭✭✭coylemj


    beauf wrote: »
    What siblings?

    OP never said that the son is an only child. This is a legal forum, you have to cater for all possibilities. There could be siblings. Which could cause no end of familial grief and conflict if the house is put into the joint names as proposed.

    Agree that the tax has to be paid anyway. But putting the house into joint names now will incur stamp duty. Which won't be payable if/when the house is transferred on inheritance.


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    #6
    Addle
    Registered Users Posts: 4,812 ✭✭✭Addle


    beauf wrote: »

    You can't avoid the tax whatever way it's done.

    I think you can, but he has to be living there for 12 years?


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    #7
    CrabRevolution
    Registered Users Posts: 2,805 ✭✭✭CrabRevolution


    I could well be wrong and the whole intention be totally innocent but the "sad situation" line and desire to have the house (partly) transferred to the son while the owner is alive also had me thinking there's someone out there they don't want getting a stake in the house, be it the taxman, sibling etc.

    Also the Fair Deal scheme takes into account any assets you disposed of in the 5 years before applying, so transferring the house now doesn't bring any benefits unless you plan on waiting 5 years to apply for the Fair Deal scheme.


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    #8
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    Even if there are other siblings. The parent could choose to not to leave it any of them.


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    #9
    coylemj
    Registered Users Posts: 25,344 ✭✭✭✭coylemj


    beauf wrote: »
    You can't avoid the tax whatever way it's done.
    Addle wrote: »
    I think you can, but he has to be living there for 12 years?

    It now applies only if you are a dependent relative of the owner. See P.2 ('24.1 Introduction') of the document I provided a link to in post #2 above.
    Since 25 December 2016, the exemption no longer applies to gifts of dwelling houses unless the gift is made to a dependent relative of the donor.

    Revenue say that dependent relatives are 'individuals who are incapacitated to such an extent that they are unable to maintain themselves by earning an income from working or who are aged 65 or over.'

    I think the unqualified exemption was the subject of gross abuse where you had lots of cases where a son or daughter (often an only child) was prepared to swear a false affidavit declaring that they had resided with the parent for 'n' years before they died, in order to dodge the CAT.


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    #10
    coylemj
    Registered Users Posts: 25,344 ✭✭✭✭coylemj


    beauf wrote: »
    Even if there are other siblings. The parent could choose to not to leave it any of them.

    +1 I suspect the proposal is designed to ringfence half of the house for the son so that even if the other siblings sucessfully challenge the will, he will still own half the house. And there may be a mistaken belief that owning 50% of the house guarantees that he can live there for the rest of his life.


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    #11
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    If it's not in joint ownership I'm assuming it would have to go into probate and cause an unnecessary delay and cost assuming there is only one beneficiary in the will, if there is a will. If there isn't and there other people with a claim it could get very complicated.

    So I assume there are no other claiments and/or the op will say there aren't regardless if there are or not.

    Otherwise there could be what ifs to eternity...


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    #12
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    coylemj wrote: »
    +1 I suspect the proposal is designed to ringfence half of the house for the son so that even if the other siblings sucessfully challenge the will, he will still own half the house. And there may be a mistaken belief that owning 50% of the house guarantees that he can live there for the rest of his life.

    My understanding is 50% ownership is different to joint ownership. In joint ownership of one dies the other person gets full ownership. In 50% you only get 50% and the rest to the will etc.

    I could be wrong.


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    #13
    coylemj
    Registered Users Posts: 25,344 ✭✭✭✭coylemj


    beauf wrote: »
    My understanding is 50% ownership is different to joint ownership. In joint ownership of one dies the other person gets full ownership.

    I belive you're correct. So I wonder how would the proposal work from the viewpoint of taxation? Would the son be considered to have been gifted half the house now and does he 'inherit' the other half when the father dies? I accept that he ends up owning the whole house but what visibilty has the taxman to the process?

    Because if the father had no other assets, he could die intestate and nobody have to do probate. Which potentially means that the son would then own the whole house but he'd only have been assssed for CAT on the first half?


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    #14
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    My understanding is you get the house valued at the time of the half and assessed for tax at that time. This is then repeated when the other owner passes. The valuation could have changed in the meanwhile.


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    #15
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    coylemj wrote: »
    +1 I suspect the proposal is designed to ringfence half of the house for the son so that even if the other siblings sucessfully challenge the will, he will still own half the house. And there may be a mistaken belief that owning 50% of the house guarantees that he can live there for the rest of his life.

    Joint ownership would avoid this. Though if there are siblings, they might take a case that they have been disinherited. I suspect there are no siblings. Could be wrong.


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    #16
    martingriff
    Registered Users Posts: 10,691 ✭✭✭✭martingriff


    Why are people thinking this is the s***w over other siblings. In our situation at home there is a number of brothers and sister we all except one have our own family and homes. Some not even close to home and we know the 1 is getting the house.

    Maybe they are looking at ways to reduce the tax the person will have to pay we all would try to do that


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    #17
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    .. And save on legal costs if possible... not to mention the time this takes...


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    #18
    Fistycuffs
    Registered Users Posts: 305 ✭✭Fistycuffs


    Thanks so very much everyone for your thoughtful and expert replies! They are very helpful. I actually suggested the joint ownership thing not realising it would be so complex, I'll admit I was thinking it would help them avoid tax but mostly so this son can stay in his home if anything happens.

    There are no siblings in the situation and I do believe from the description earlier in the thread that the son would qualify as a dependant even though he is in his 40s. While he is now a carer for his dad I don't think he has ever worked due to ill health and he is regularly in and out of hospital. I don't know the nature of the condition but often give him lifts. He's definitely unwell since childhood. I'll try broach it delicately as it may well be very relevant for them.

    Would a solisitor be very expensive for joint ownership? Would they need to pay stamp duty.

    Is there a different between joint ownership and half ownership? I didn't realise there would be.

    Thanks a million again.


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    #19
    coylemj
    Registered Users Posts: 25,344 ✭✭✭✭coylemj


    Fistycuffs wrote: »
    Thanks so very much everyone for your thoughtful and expert replies! They are very helpful. I actually suggested the joint ownership thing not realising it would be so complex, I'll admit I was thinking it would help them avoid tax but mostly so this son can stay in his home if anything happens.

    Putting it in their joint names won't avoid the tax, now or down the line. And it may have the opposite effect and bring the tax forward. For example, if the house is worth more than 670K and they put in their joint names now, the son would then be considered to have been gifted an asset (half the house) which is worth more than the 335K exemption threshold so he would have to pay tax there and then. And there appears to be no exemption for a dependent relative in that situation, that relief only applies when the owner 'bequeaths the property to a successor' according to the Revenue document I provided a link to in post #2.

    I can't see that there is any taxation benefit if they put the house in their joint names.
    Fistycuffs wrote: »
    There are no siblings in the situation and I do believe from the description earlier in the thread that the son would qualify as a dependant even though he is in his 40s. While he is now a carer for his dad I don't think he has ever worked due to ill health and he is regularly in and out of hospital. I don't know the nature of the condition but often give him lifts. He's definitely unwell since childhood. I'll try broach it delicately as it may well be very relevant for them.

    In that case what they need to do is that the father makes a will leaving the house to the son. When the time comes and if the house is worth more than the exemption threshold (currently 335K), the son makes a claim to Revenue for a full exemption based on the fact that he was a dependent relative.
    Fistycuffs wrote: »
    Would a solisitor be very expensive for joint ownership? Would they need to pay stamp duty.

    We're not allowed to discuss fee levels in this forum. They would need to pay stamp duty to put the house in the joint names now. If the son inherits the house, there is no stamp duty payable on inheritance.
    Fistycuffs wrote: »
    Is there a different between joint ownership and half ownership? I didn't realise there would be.

    Poster Beauf explained it in post #12....
    beauf wrote: »
    My understanding is 50% ownership is different to joint ownership. In joint ownership of one dies the other person gets full ownership. In 50% you only get 50% and the rest to the will etc.


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    #20
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    I'm thinking, and could be wrong is that the advantage of joint is that you don't have to wait for probate (which can take some time) to gain ownership, and legal costs of Probate.
    Disadvantage as per Coylemj that if half the property is worth more than the exemption threshold this becomes due in the same tax year. (Oct31)

    There also inheritance insurance to consider. But I expect its too late for that.


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    #21
    mdebets
    Registered Users Posts: 1,747 ✭✭✭mdebets


    coylemj wrote: »
    Fistycuffs wrote:
    Would a solisitor be very expensive for joint ownership? Would they need to pay stamp duty.
    We're not allowed to discuss fee levels in this forum. They would need to pay stamp duty to put the house in the joint names now. If the son inherits the house, there is no stamp duty payable on inheritance.
    Would they not need two solicitors for the for joint ownership, one for the parent and one for the son?


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