Inherited house staying the family.

Sebzy

Looking for some advice on how to best keep an inherited family home in the family. Mother passed recently leaving four siblings the family home in her will. We've had the property valued at €300,000 but would like to sell it much under valuation to one sibling say about €130,000

How would we go about doing this and not making a balls of it and becoming liable for taxes left right an centre.

Thanks

leinster93

I dont think you will get the reply you are looking for here but this link may help figure things out.
It may be wise to go to a good solicitor imho...
https://www.irishtimes.com/business/personal-finance/joint-tenants-tenants-in-common-and-inheritance-1.4065074?mode=amp

Sebzy

Just completely new to this and concerned about doing it right. Thanks for the advice.

Turkish1

Sebzy wrote: »

Looking for some advice on how to best keep an inherited family home in the family. Mother passed recently leaving four siblings the family home in her will. We've had the property valued at €300,000 but would like to sell it much under valuation to one sibling say about €130,000

How would we go about doing this and not making a balls of it and becoming liable for taxes left right an centre.

Thanks

Should be very easy to do and any tax advisor will be able to confirm very quickly.

Assuming house was split equally that is a €75k valuation per share. Low enough than no taxes due on the initial inheritance (assuming it is the only inheritance)

Then the sale under market value - I suspect it would be treated as follows:

Sibling buying for €130k is effectively receiving gift of €95k from three siblings (difference between the €225k the three siblings inherited and the €130k)

So that is c. €31.7k 'gift' from each sibling. Assuming they see blood siblings there is a certain group they will fall into and I think siblings is €30 or €40k tax free lifetime.

The above is based on a number of assumptions and I am not a tax expert so you should absolutely get professional advice but on the face of it doesn't seem particularly complex or liable to land anyone with a significant tax bill.

Sebzy

Right so after reading that article I have more questions, With a property market valued at 300k each of the four siblings would be liable for 24.75k inheritance tax right? and this is before being able to sell the property

300 / 4 = 75k
33% of 75k = 24.75k

Now if we intend to sell for €130k then we are liable for capital gains (30%) on the full market value of €300 as it was sold under market value. This would mean each of the four siblings are liable for a further 22.5k

my head hurts

Now the actual real world gains per sibling is 32.5k bit taxation to complete the process is €47k so a loss of 14.5k per sibling.

How can that be right.

Turkish1

Sebzy wrote: »

Right so after reading that article I have more questions, With a property market valued at 300k each of the four siblings would be liable for 24.75k inheritance tax right? and this is before being able to sell the property

300 / 4 = 75k
33% of 75k = 24.75k

Now if we intend to sell for €130k then we are liable for capital gains (30%) on the full market value of €300 as it was sold under market value. This would mean each of the four siblings are liable for a further 22.5k

my head hurts

Now the actual real world gains per sibling is 32.5k bit taxation to complete the process is €47k so a loss of 14.5k per sibling.

How can that be right.

It's not - speak to a tax consultant. You haven't considered the tax free allowances for gifts/inheritance from Parents to Children and also between siblings.

Might cost you a couple quid but talk to tax consultant and they will outline clearly the approach to take and as I said it should be very easy to ensure no (or little) tax liability for anyone on either transaction (the inheritance or the subsequent sale under market value)

StackSteevens

Sebzy wrote: »

With a property market valued at 300k each of the four siblings would be liable for 24.75k inheritance tax right? and this is before being able to sell the property

Wrong!

You can each inhert up to €335,000 from a parent without any liability to CAT (Inheritance tax) arising.

So no CAT liability arises on your four respective €75,000 inheritances.

The only one who will need to pay any tax is the sibling getting the gift of 3 X €31.7k from his/her siblings.

Gingermac

Might be possible to use disclaimers for consideration here to avoid all CAT. Again talk to a tax adviser

Bicyclette

It really would be worth your while consulting a taxation specialist.

The best information is available from the Revenue Commissioners site https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/index.aspx

Transfers between Parents and children fall into the Group A CAT threshold, meaning you don't pay tax on the first €335,000 value of any inheritance or gift. With the house valued at €300,000, each of the four siblings only inherit goods to the value of €75,000. So unless there are substantial other assets being inherited by you or if you have had previous inheritances from a parent, then CAT issues are unlikely to apply.

Transfers between siblings fall into Group B CAT threshold, meaning no tax is payable on the first €32,500 worth of inheritances or gifts within this group. This is cumulative. So you need to calculate all previous gifts or inheritances in this category.

BUT, there is a bit of a loophole in that the Small Gift Exemption also exists https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-exemptions/small-gift-exemption/index.aspx This means that you can receive gifts to the value of €3,000 from any person in any year and this will be exempt. If the three siblings were to gift €3,000 each to the fourth before the end of the year then that would be €9000 given tax free.

Victor

It might also be possible for the 3 other siblings to disclaim their inheritances. However, this means they have to disclaim everything, not just the house.

What is the source / purpose of the €130,000 number?

davindub

The transfer will be taxed as MV of the gift here OP.

coylemj

If the three siblings disclaim their inheritance, the house could end up being inherited by the fourth sibling and it would be free of CAT since it's below the 335K threshold for inheriting from a parent. The fourth sibling could then 'gift' up to €32,500 tax free to each of the three other siblings.

But there are major risks doing this as the terms of the will could lead to unintended consequences.

When you disclaim an inheritence, it falls into the residue and that's where the potential trap lies. Say the mother left the house to the four siblings and say she had some money in a few bank accounts and decided to leave her cash to be divided up among her grandchildren. So her will might say that after bequesting the house in equal shares to her children, the residue of her estate was to be divided up amongst her grandchildren. If the three siblings disclaim their 3 x 1/4 shares, that 75% of the house would end up in the hands of the grandchildren.

Claw Hammer

Gingermac wrote: »

Might be possible to use disclaimers for consideration here to avoid all CAT. Again talk to a tax adviser

A person has to disclaim everything unconditionally. The op wants to be paid something for his share. Forget disclaimers.

Gingermac

Claw Hammer wrote: »

A person has to disclaim everything unconditionally. The op wants to be paid something for his share. Forget disclaimers.

Wrong. Do some research.

Claw Hammer

Gingermac wrote: »

Wrong. Do some research.

A disclaimer is just that, a disclaimer. A disclaimer in favour of another person is a gift. That is precisely the situation the OP is trying to avoid.

Claw Hammer

Claw Hammer wrote: »

A disclaimer is just that, a disclaimer. A disclaimer in favour of another person is a gift. That is precisely the situation the OP is trying to avoid.

So what you’re saying is, if the 3 other siblings renounce their share of an inheritance, 3/4ers of the house is no longer seeing as coming from the mother? Any link to this explanation? I don’t see how it’s seen as a gift as nothing has transferred between parties. The only thing that’s happened is less people now as beneficiaries of the will

Claw Hammer

Deleted User wrote: »

So what you’re saying is, if the 3 other siblings renounce their share of an inheritance, 3/4ers of the house is no longer seeing as coming from the mother? Any link to this explanation? I don’t see how it’s seen as a gift as nothing has transferred between parties. The only thing that’s happened is less people now as beneficiaries of the will

If they renounce completely all of the house comes from the mother, provided there is no residue clause leaving it to someone other that the remaining sibling.
What the o/p wants is to get roughly half of his share.
If he says I give ,y share to sibling A for 35k then he has taken his share under the will and gifted a portion of it. That is not a disclaimer.

Gingermac

Clawhammer- a disclaimer for consideration is a useful tax tool.


If I disclaim my interest in the house for X consideration ( provided it is not more than the value of my interest in teh first place), then the consideration I receive is treated as coming from the original disponer. This is a completely different thing to a disclaimer in favour of another person- that is not a disclaimer at all, but rather a deed of family arrangement.


If, having disclaimed, the interest goes to the other sibling, then it is very beneficial tax wise as the other sibling still gets the house from their parent also but less the value of what they have to pay.


if the wording of the devise is making a tenancy in common, rather than a joint tenancy, then it depends on the residue clause and what that wording is.


Advice is needed here from a tax consultant with knowledge of legal wording in wills and specific to this particular will.

Claw Hammer

Gingermac wrote: »

If I disclaim my interest in the house for X consideration ( provided it is not more than the value of my interest in teh first place), then the consideration I receive is treated as coming from the original disponer. This is a completely different thing to a disclaimer in favour of another person- that is not a disclaimer at all, but rather a deed of family arrangement.


.

A deed of arrangement requires all of the beneficiaries to agree, in which case the benefit is deemed to come from the original disponer.

Gingermac

Claw Hammer wrote: »

A deed of arrangement requires all of the beneficiaries to agree, in which case the benefit is deemed to come from the original disponer.

No, that's incorrect. It is possible to do that in England but not in Ireland.


A Deed of family arrangement is simply a new agreement between the beneficiaries but is subject to stamp duty, CAT and CGT for any difference between what the beneficiaries would originally have been entitled to under the will and any new benefits taken under the deed. Although there can be a CGT relief if done within two years of the death.

Claw Hammer

Gingermac wrote: »

No, that's incorrect. It is possible to do that in England but not in Ireland.


.

These accountants don't agree.

https://www.charteredaccountants.ie/taxsource/1997/en/act/pub/0039/nfg/sec0573-nfg.html

"To facilitate family arrangements after death, there is provision that any variation made by deed of family arrangement in the disposition of the deceased’s assets between the members of the family within 2 years of the death (or such longer period as the Revenue Commissioners may allow) is to be regarded as made by the deceased at the time of his/her death, and the family arrangements are not to be treated as the occasion of a disposal of the assets."

Gingermac

Did you even read what you quoted? That is in relation to CGT- which I referenced below. But it doesn't apply to CAT or stamp duty.

AnRothar

Gingermac wrote: »

Clawhammer- a disclaimer for consideration is a useful tax tool.


If I disclaim my interest in the house for X consideration ( provided it is not more than the value of my interest in teh first place), then the consideration I receive is treated as coming from the original disponer. This is a completely different thing to a disclaimer in favour of another person- that is not a disclaimer at all, but rather a deed of family arrangement.


If, having disclaimed, the interest goes to the other sibling, then it is very beneficial tax wise as the other sibling still gets the house from their parent also but less the value of what they have to pay.


if the wording of the devise is making a tenancy in common, rather than a joint tenancy, then it depends on the residue clause and what that wording is.


Advice is needed here from a tax consultant with knowledge of legal wording in wills and specific to this particular will.

Totally agree with the last part that the OP needs to speak to a professional regarding the specifics of their parents will and their own circumstances.

Just curious about the first part about a disclaimer in tax may be different to a disclaimer in law.
Can you link the relevant tax guidance material or law?

Gingermac

AnRothar wrote: »

Just curious about the first part about a disclaimer in tax may be different to a disclaimer in law.

I am not sure what you mean, the disclaimer will take effect according to the law, and will follow the wording of the will and the effect of the Succession Act on that wording or on intestacy.


Disclaimers are very useful but you have to be very careful about the use because, depending on the circumstances, they may not have the effect you might think.


Sometimes a disclaimer of a benefit, means it falls into the residue, but sometimes it goes to the other beneficiaries of that particular clause, depending on the wording. And sometimes it means it falls to intestacy. So you just have to be sure that the disclaimer will have the intended effect before using them.

AnRothar

Gingermac wrote: »

I am not sure what you mean, the disclaimer will take effect according to the law, and will follow the wording of the will and the effect of the Succession Act on that wording or on intestacy.


Disclaimers are very useful but you have to be very careful about the use because, depending on the circumstances, they may not have the effect you might think.
.

Sorry for any confusion . I have no idea what a disclaimer actually is not to mention how it could be worded.



I was following the discussion and was wondering if there was some published rules/definition or similar.


More out of curiosity than anything else.

Gingermac

Well if someone inherits something in a will, they don't have to accept it. If they don't want to accept it, they 'disclaim' it. So they sign a document saying they don#t want it.



That document could say, I don't want just that bit, or all of it or I will accept €5 to disclaim it.


But it's not that simple, sometimes the wording of that bit in the will means that if you disclaim the wrong person takes it in your place. So you have to be very careful


But sometimes they can be really useful and a disclaimer means that the right person gets the asset and it is really tax efficient. So they can be really great, or useless, depending!:)