Inherited house

Pero_Bueno

Hi
Just curious if parents leave a house to their son/daughter and there is no debts (all mortgage paid off etc) and the son/daughter wants to move into the house - do they still need to pay the inheritance tax on it ?

bennyx_o

Yes. There are exemptions though. Have a read of this: http://www.revenue.ie/en/gains-gifts-and-inheritance/cat-exemptions-and-reliefs/exemption-for-dwelling-house/index.aspx

Claw Hammer

Pero_Bueno wrote: »

Hi
Just curious if parents leave a house to their son/daughter and there is no debts (all mortgage paid off etc) and the son/daughter wants to move into the house - do they still need to pay the inheritance tax on it ?

It depends on the value of the house , whether there have been any previous gifts, whether the inheritor owns another house, whether the inheritor has been living in the house for at least 6 years prior to inheriting. Professional advice should be obtained while the parents are still alive.

Pero_Bueno

So we live abroad, and have our own places, so basically we will be slapped with a huge bill when we get this house ?

This is nuts, we cant afford it and dont want to sell the house.

Graham

Pero_Bueno wrote: »

So we live abroad, and have our own places, so basically we will be slapped with a huge bill when we get this house ?

Nobody said that. Get professional advice to find out what your position would be, it has potential to be complicated as you're non-resident. You may also have a liability to the country you reside in.

Pero_Bueno wrote: »

The criminal mafia scum Irish revenue making up taxes again just to rob people.

Inheritance taxes aren't a uniquely Irish thing.

Pero_Bueno

YEs I know, in fact its worse in places.
OK thanks ill get some advice.

antoinolachtnai

We'll find out what tax is due. There might be tax due in the country where you live too. You will have to check.

If you are going to move in, and have some sort of income you can always get a loan.

Death and taxes, they say.

bmwguy

Pero_Bueno wrote: »

So we live abroad, and have our own places, so basically we will be slapped with a huge bill when we get this house ?

This is nuts, we cant afford it and dont want to sell the house.

The criminal mafia scum Irish revenue making up taxes again just to rob people.

It can pass to spouse tax free but to children the threshold is 325k I believe. There are life assurance policies available with the sole purpose of paying an inheritance tax bill without selling off assets. I know my cousins have one because their parents are minted and they will inherit a few million each in cash and other assets.
Are your parents still alive? Go talk to someone instead of taking everything here for gospel whatever it costs it will be well worth it.

BBMcQ

At a very basic level, Get a mortgage and rent it out to pay the mortgage.

4ensic15

Pero_Bueno wrote: »

So we live abroad, and have our own places, so basically we will be slapped with a huge bill when we get this house ?

This is nuts, we cant afford it and dont want to sell the house.

So you don't want to move in at all then? You were planning to scam the taxman by pretending you were moving in.

Water John

They don't want to sell but to get it for free. Like issue in another country. They want to eat their cake and still have it.

Alternatively, tell your parents to give it to someone else or charity. No tax bill for you.

robp

Water John wrote: »

They don't want to sell but to get it for free. Like issue in another country. They want to eat their cake and still have it.

Alternatively, tell your parents to give it to someone else or charity. No tax bill for you.

Inheritance tax is absent n many countries and is is lower in many countries. Ireland take in one the highest proportion of inheritance or estate taxes of any major world economies, according to a study by UHY.

The_Conductor

robp wrote: »

Inheritance tax is absent n many countries and is is lower in many countries. Ireland take in one the highest proportion of inheritance or estate taxes of any major world economies, according to a study by UHY.

Yes- we have a high rate of inheritance tax that kicks in at a low level.
Same- thing- we have a high rate of personal taxation- that kicks in at a low level.

This is offset by- low corporation tax rates- which entice multinational companies here- who provide just under 40% of all employment in the economy. And the flipside of the coin- is a remarkable social welfare system- and disbursements- that are a multiple of times better than in many of our neighbouring countries.

The Irish taxpayer- wants its cake- and to eat it..............

Inheritance tax- unless it is planned in a remarkable manner- is a simple fact of life. If you don't want to sell the property- mortgage it, to pay the taxes due on it- and pay it back over time. Keep in mind- you'll owe annual property tax and connection charges for gas, electricity, phone/internet etc etc.

OP - If you don't intend to use the property- just why are you planning on keeping it?

beauf

The_Conductor wrote: »

...Inheritance tax- unless it is planned in a remarkable manner- is a simple fact of life. If you don't want to sell the property- mortgage it, to pay the taxes due on it- and pay it back over time. Keep in mind- you'll owe annual property tax and connection charges for gas, electricity, phone/internet etc etc....

Tax due?

That would be the tax the owner paid on wages to pay a mortgage, then the tax on the mortgage, tax on everything to do with keeping a house. But when you die you still own tax.

Must pay the tax about 10 times on a property.

rsynnott

I'm always amazed that people get so excited about inheritance tax. It's arguably one of our most progressive taxes; the large majority of people will never pay it at all. You have to be left over 310k to pay anything, if it's from a parent! And it's on money that you didn't generally actually do anything to earn. I dunno, just seems like a very strange thing to object to.

beauf

rsynnott wrote: »

I'm always amazed that people get so excited about inheritance tax. It's arguably one of our most progressive taxes; the large majority of people will never pay it at all. You have to be left over 310k to pay anything, if it's from a parent! And it's on money that you didn't generally actually do anything to earn. I dunno, just seems like a very strange thing to object to.

People object to having to pay tax on money/property they've already been taxed on if they want to give it to their kids.

For some reason never look on it from the parents POV. I find that odd.

Victor

beauf wrote: »

That would be the tax the owner paid on wages to pay a mortgage,

Sure, but everyone pays that.

then the tax on the mortgage,

Really? What is this tax called?

tax on everything to do with keeping a house.

Until recent years, there was no tax on keeping a house, which was outside international norms.

beauf wrote: »

But when you die you still own tax.

When you die, there are no taxes due (there might be a small probate charge). When you make a capital acquisition, taxes are due.

Realise that the state has to raise revenue somehow. Only taxing income means that people will do their damndest to restructure things to not be 'income'. It's good policy to have several different taxes in place to reduce avoidance options.

rsynnott

But why look at it from the parent's point of view? It's the recipient who pays (an incredibly generously low rate of) tax on it. Almost no matter what the parent spends it on, unless it's a gift to charity, tax will get paid somewhere. It's very hard to get rid of money without tax happening on the transaction at some point, except, for most people, via inheritance.

And again, this simply isn't a tax that affects most people at all. Let's say you have a house worth 600k, which is definitely on the high end. You're in your 70s or 80s, so you probably have two or three kids at least. You die, if you have two kids they each get 300k and pay nothing. This is the most generous tax treatment of a 300k windfall available, by a long way.

There'll be some people, of course, who have just one kid, in which case if they have a reasonably valuable house the kid will pay generally a very low rate. And there'll be some people who have serious wealth, maybe a house worth a million and some other assets, and the kids will pay a fair bit of tax, though still way, way less than income tax. And again this is money they didn't actually earn, in most cases. But ultimately, in a country where you have people having to pay close to 50% on everything in excess of 36k, I'm not sure that inheritance tax should be anyone's primary concern, tax-wise, really.

endacl

rsynnott wrote: »

I'm always amazed that people get so excited about inheritance tax. It's arguably one of our most progressive taxes; the large majority of people will never pay it at all. You have to be left over 310k to pay anything, if it's from a parent! And it's on money that you didn't generally actually do anything to earn. I dunno, just seems like a very strange thing to object to.

Indeed. It's really an opportunity to buy a gaff at a fraction of what it's worth. Don't want to or can't pay out of pocket? Grand. Sell it and come out on top. Don't want to sell it? Grand. Borrow the tax bill and rent it. Still come out on top.

robp

rsynnott wrote: »

And again, this simply isn't a tax that affects most people at all. Let's say you have a house worth 600k, which is definitely on the high end. You're in your 70s or 80s, so you probably have two or three kids at least. You die, if you have two kids they each get 300k and pay nothing. This is the most generous tax treatment of a 300k windfall available, by a long way.

Farm land windfalls are subject to vastly more generously tax exemptions. Also whether or not it is generous relatively speaking has no bearing on whether it is sensible or not.

Peregrinus

beauf wrote: »

People object to having to pay tax on money/property they've already been taxed on if they want to give it to their kids.

For some reason never look on it from the parents POV. I find that odd.

From the parents' point of view it's a dream. They don't have to pay inheritance tax at all. There's no inheritance tax liability until they're dead, at which point it can be of no possible concern to them. It cannot affect them in any way.

I get that their heirs might be a bit miffed at having to pay the tax. On the other hand, they've just received an enormous windfall which they have done absolutely nothing to create or to earn; they are better positioned than most of us to bear a tax liability.

The_Conductor

Peregrinus wrote: »

From the parents' point of view it's a dream. They don't have to pay inheritance tax at all. There's no inheritance tax liability until they're dead, at which point it can be of no possible concern to them. It cannot affect them in any way.

I get that their heirs might be a bit miffed at having to pay the tax. On the other hand, they've just received an enormous windfall which they have done absolutely nothing to create or to earn; they are better positioned than most of us to bear a tax liability.

Also- keep in mind- if the current owner of the property requires nursing home care in their latter years- 22.5% of the value of the property may be due to the HSE in satisfaction of nursing home care bills- wholly independent of any other taxes or charges due...........

Baby01032012

The_Conductor wrote: »

Also- keep in mind- if the current owner of the property requires nursing home care in their latter years- 22.5% of the value of the property may be due to the HSE in satisfaction of nursing home care bills- wholly independent of any other taxes or charges due...........

In addition to the 22.5% of the primary residence there's 80% of the individuals income to be forfeited to the state to pay for their care. All after paying the state their appropriate share of tax on it.

On earlier points, in majority of cases the inherited asset has already been subject to tax in that this is someone's after tax savings which may have been subject to 54% personal tax 41% dirt on income or 33% if there was a gain. And then when the heavily taxed asset is passed on to their nearest and dearest they are subject to 33% tax on the full value. I can understand if it's on an increase in value above what was previously taxed. How anyone can say it's a cheap form of income for the family.

Peregrinus

Obviously, to the extent that you expend your assets in providing care for yourself in your declining years, your children are not going to inherit those assets and so no question of inheritance tax will arise. There's only going to be an inheritance tax bill if and to the extent that the assets that youhaven't spent on yourself exceed the threshold. It's impossible that the same asset should be depleted by both these charges.

4ensic15

Baby01032012 wrote: »

In addition to the 22.5% of the primary residence there's 80% of the individuals income to be forfeited to the state to pay for their care. All after paying the state their appropriate share of tax on it.

On earlier points, in majority of cases the inherited asset has already been subject to tax in that this is someone's after tax savings which may have been subject to 54% personal tax 41% dirt on income or 33% if there was a gain. And then when the heavily taxed asset is passed on to their nearest and dearest they are subject to 33% tax on the full value. I can understand if it's on an increase in value above what was previously taxed. How anyone can say it's a cheap form of income for the family.

In a lot of cases, tax relief was claimed on the mortgage interest which was a gift to the family, who did not have to pay rent. In many cases a small deposit has turned into a substantial asset courtesy of the state. taxing unearned income is a good source of revenue. The fact that someone has to pay inheritance tax depends on hom many siblings there are and how wealthy their parents were. A €1M house divided between 5 siblings would not provoke an inheritance tax liability.

The_Conductor

Guys- just so there is no confusion- the 54% tax rate being bandied around- is for those who are self employed- its 51.5% for PAYE employees (I'm clarifying this for the OP's benefit as they are not tax resident here).

OP- in all honesty- there may be significant debt associated with the property- which will need to be cleared after the will is probated.

The latest bit of property tax planning- from those who can afford the advice and also the element of uncertainty it involves- is divesting of property but keeping a lifelong right of residence in property- as quickly as possible. This has a number of benefits-

1. The value of the property (and hence any CAT/CAG etc) is much lower- as the property is worth less when there is a lifelong right of residence associated with it.

2. The 22.5% value of the property for nursing home care- is for any property or assets that the person requiring the care holds- or has held in the 5 years preceding their entry to the nursing home- aka the sooner you get rid of the assets- the sooner the clock starts ticking on the 5 years.

3. If the person inheriting the property has a reasonable run-in to experience the property- its upkeep etc- they'll have a better appreciation of what the property, and its ownership, entails- rather than getting hit on the head with all of these things- when their loved one passes on.

Anyhow- the OP has plenty to think of- but both the OP and their parent- need good tax and retirement/inheritance planning advice- it'll cost them, but by god, it'll be money well spent.

The_Conductor

Peregrinus wrote: »

Obviously, to the extent that you expend your assets in providing care for yourself in your declining years, your children are not going to inherit those assets and so no question of inheritance tax will arise. There's only going to be an inheritance tax bill if and to the extent that the assets that youhaven't spent on yourself exceed the threshold. It's impossible that the same asset should be depleted by both these charges.

It may not be depleted- but with accruing property tax, the HSE fair-deal nursing home care and sundry expenses- it would be far from unusual for >30% of the value of the property to be dissipitated- before inheritance tax etc even entered the picture.

This is how the state managed to get so many large ancestral homes into public ownership- though some families simply got unlucky with untimely deaths- Johnstown Castle- had 3 inheritors pass away in a 22 month window- when the inheritance threshold was a lot lower than it is today. The family simply handed over the property- but kept the fishing rights on the property- which they continue to hold to this day. Lots of other very interesting examples out there too- and many curious stories- often involving one state agency desperately trying to offload property on another state agency (usually the OPW) as the ongoing costs of upkeep are accelerating at unexpected pace.

Peregrinus

The_Conductor wrote: »

It may not be depleted- but with accruing property tax, the HSE fair-deal nursing home care and sundry expenses- it would be far from unusual for >30% of the value of the property to be dissipitated- before inheritance tax etc even entered the picture..

Hardly dissipated, Con. It has been spent providing necessary care and support for someone in a vulnerable situation - someone who was perfectly entitled to spend it that way since it was, after all, their property.

The_Conductor wrote: »

This is how the state managed to get so many large ancestral homes into public ownership- though some families simply got unlucky with untimely deaths- Johnstown Castle- had 3 inheritors pass away in a 22 month window- when the inheritance threshold was a lot lower than it is today. The family simply handed over the property- but kept the fishing rights on the property- which they continue to hold to this day. Lots of other very interesting examples out there too- and many curious stories- often involving one state agency desperately trying to offload property on another state agency (usually the OPW) as the ongoing costs of upkeep are accelerating at unexpected pace.

For the same reason as state agencies try to unload these properties onto one another, families are frequently happy to surrender the properties to the state in settlement of tax liabilities which would otherwise have to be paid in cash. The fact is that these properties are onerous. In many cases if the families didn't transfer the properties to the state they'd have to get rid of them anyway, since on account of that damned bolshevist land purchase scheme of the late nineteenth century they no longer have the rent roll which previously financed the construction and maintenance of the property concerned.

Nobody is ever required to settle tax liabilities by transferring properties. If they have a viable business plan to exploit the property (e.g. by running a hotel in it) they can borrow to pay the tax liablity and then repay the borrowings out of revenue. The fact that this rarely happens just underlines the point; these properties are onerous and the social and economic systems which used to sustain them are no longer in place. I don't think you can blame the capital acquisitions tax for that.

Diemos

rsynnott wrote: »

I'm always amazed that people get so excited about inheritance tax. It's arguably one of our most progressive taxes; the large majority of people will never pay it at all. You have to be left over 310k to pay anything, if it's from a parent! And it's on money that you didn't generally actually do anything to earn. I dunno, just seems like a very strange thing to object to.

Can't you see why people feel so empassioned about it though?
I've earned my money, paid my taxes while doing so and I have an asset to show for my hard work. Why should my loved ones have to pay a tax on money which I've already paid tax on?

beauf

Victor wrote: »

Really? What is this tax called?

http://www.revenue.ie/en/property/mortgage-interest-relief/what-type-of-loan-does-not-qualify.aspx

Victor wrote: »

Realise that the state has to raise revenue somehow. Only taxing income means that people will do their damndest to restructure things to not be 'income'. It's good policy to have several different taxes in place to reduce avoidance options.

Sounds all well and good if they use the tax wisely. The first thing they did with Irish water was not fix the water, it was to fix their bonuses. etc etc. So if the state wants to tax me umpteen times on same euro, spare me the "state needs money routine" we're all out of sympathy here.

Riskymove

beauf wrote: »

http://www.revenue.ie/en/property/mortgage-interest-relief/what-type-of-loan-does-not-qualify.aspx

er... thats Mortgage Interest "Relief"

as in a tax credit (money bacl) to the mortgage payer....it is not a tax paid by the holder