Beqeathing family home tax efficiently

pj9999

Widower considering bequeathing family home to one of my adult children.
They are considering selling their existing PPR, and coming to live with me. If my house remains their PPR for 3 years, then I understand there should be no CAT implications for him when I die.

However assuming I don’t last long enough, I’m thinking of leaving €335k worth of the house to the adult child, plus €32.5k worth of the house to his 3 children (almost adults themselves).
So no CAT payable as long as house isn’t valued above around 440k (which it well could be I admit).

Are there any significant issues in bequeathing a propertly like this? Can you e.g. say “I want to bequeath 335k worth of the property to X”, 32.5k worth to Y etc."?

Thanks
P

Peregrinus

You can certainly leave the house in specified shares to different people in the way you suggest.

However it could make for an awful mess if, later, the family fall out, which families do surprisingly frequently (particularly over inheritances). For example, as your now near-adult grandkids they leave the house, they may wish to realise their shares in it e.g, in order to fund a deposit on a house of their own. Is your son going to buy them out? Can he afford to? Note also the long-term CGT implications; if the grandkids leave the house but don't sell their shares to your son, their shares in the house are not their principal private residence (because they don't live there) and, when they eventually do realise the value of their shares, CGT will be payable (assuming the house has appreciated in value).

In other words, think things through carefully. If you do as you suggest, your three grandkids will own a share in the house. How will that work out in practice? Is it what you want? If it isn't, be careful about doing things that way for tax efficiency; sometimes tax efficiency isn't the biggest concern you should have.

ax530

could an option be that he purchases a part of the house from you now ? then you could leave the remaining share of the house ?
I presume in the long run would be best not splitting house out to him & children between solicitors fees and the family selling\swapping\ leaving portions to each other again could still end up costing as much as the tax.

Smee_Again

Get married?

coylemj

Smee_Again wrote: »

Get married?

pj9999 wrote: »

... to one of my adult children.

:eek:

Smee_Again

coylemj wrote: »

:eek:

Ah, I didn't realise the OP was the widower.

coylemj

pj9999 wrote: »

Widower considering bequeathing family home to one of my adult children.
They are considering selling their existing PPR, and coming to live with me. If my house remains their PPR for 3 years, then I understand there should be no CAT implications for him when I die.

As you mention him selling his house, you're already aware that he can't own or have an interest in any other house if he is to inherit your house free of CAT. And he has to hold on to your house for six years after he inherits it.

Considering that both of you would continue to own appreciating assets by holding on to your respective houses, I can't see that it would make financial sense for him to convert his house to cash and leave the money earning a tiny rate of interest (on which DIRT will be levied) for three years, just to save a few thousand euros in CAT when he inherits your house.

And while you have the best intentions, he would be stark raving mad to to sell his house and leave himself (in terms of property ownership) homeless waiting for you to leave him the house. Consider his situation ...... what happens if you have a falling out, give him his marching orders and decide to leave the house to the grandkids? Or the Cats' and Dogs' home?

pj9999

That’s ok Smee - you gave me a laugh!

So if son sells his only property, he could then buy say 150k worth of my house?
Then I bequeath my home to him in it’s entirety, so CAT would only be applicable above 485k (150k & 335k allowance)? (485k being a likely current value of the house).

The extra 150k in my bank account would then be added to residue of my estate for distribution to my other children, who I know would be happy with this idea.

Does this sound like a plan?

Peregrinus

The same result could be achieved by bequeathing your son (1) a share in the house worth an amount equal to the then-applicable CAT threshhold plus (2) an option to buy the remaining share from the estate at market value, and bequeathing to your other children the proceeds of that sale, if your son chooses to buy, or the remaining share in the house, if he doesn't. Your son then doesn't have sell his current house until The Time Comes, and when it does come he can decide not to do that, if it at the time it doesn't look like a good idea, or he can decide to finance the purchase not by selling his existing house but by raising a mortgage (or by selling something else). All in all, much more flexible.

(Just make sure your other kids are on side with this. Unless you have lots of other assets to leave them, it looks as if your son who gets the house is going to do better out of this than his brothers and sisters are. Which may be fine, if that's what you want, but it would be even finer if they were all on side as well. Otherwise family rí-rá agus ruaille-buaille is quite likely, and there's a sporting chance of a legal challenge.)