Signing over a share of inheritance

troyzer

Hi all,

This is genuinely asking for a friend territory here.

My friend's father died ten years ago. He was not on good terms with his wife or some of his kids but ultimately was obliged to leave his wife a third of his estate which included the family home. The home is the only remaining asset as there were also debts that needed to be settled. It was decided to allow the wife and some of the kids to live in the family home and the funds from selling the house would be dispersed in accordance with the will when the family home was eventually sold. So the will is out of probate for years now.

Now they want to sell the house. The wife won't have enough money from the sale to buy a new place. Several of the kids who are also due to get money from the sale would rather just give it back to their mam so that she can get her own place.

Is there a way of doing this without being crucified with gift taxes? This is effectively an inheritance they want to forgo and sign over to another beneficiary to the will. Is there a procedure that allows for this or will revenue simply treat it as a cash gift and tax it as such. These kids feel like it was wrong to not give the entire house to the wife in the first place and are trying to correct what they see as an injustice.

Cheers and apologies in advance if this is in the wrong place!

Donald Trump

I would imagine that they could have signed away the inheritance at the time but if it is sorted now and transferred to them then a laymans interpretation would be that a transfer now is completely separate.

Why not just buy the new place together? I mean the kids who would sign their over to the mother instead buy a share in the new place. (They'd be liable for tax on the capital gains if it was later sold)

troyzer

https://www.boards.ie/discussion/comment/118356053#Comment_118356053

That was mooted early on and still is an option but I don't think people want it. The kids who want to give up their shares either have their own homes already or don't need the money to buy. And the mother wants her own place. Could go down the road of a share thing I suppose. So Kid X gives 20% of the value of the house and goes on the deed? Something like that?

Just to confirm then, a straight up cash gift would draw a gift tax? What percentage is the tax set at?

Donald Trump

https://www.boards.ie/discussion/comment/118356107#Comment_118356107

The thresholds would come into play. Child to parent might be the same as parent to child which is fairly high (I don't know but it would be easily googled).

Further complications might be if one child gives the cash to the mother, others don't and then the house is later on left equally between all children. As long as they are ok with that risk. They might not be.

If it is a large amount, the child might also have used up all, or most, of their lifetime threshold in the original inheritance. They need to consider that too. So even if they later get it back via a second inheritance, the tax could kick in then

Spanish Eyes

Who is/are the currently registered owners of the property and in what shares. How much is the house worth now?

Gifts to parents are Group B threshold (around 32k in total from all children) and the balance is taxed at 33%. The first 3k of a gift from each child in any year is tax free.

There may be capital gains tax for the children if their share has increased in value since the inheritance from their father, although a credit for one against the other may apply.

troyzer

https://www.boards.ie/discussion/comment/118356128#Comment_118356128

I don't think there's much of a worry over what way the house is going to be split later on. The kids are genuinely just trying to do best by their mam. As you say, it's a risk but they're okay with it.

It was a big family so none of the kids are even close to the lifetime inheritance limit from the dad dying and probably won't approach it after inheriting from their Mam too.

https://www.boards.ie/discussion/comment/118356188#Comment_118356188

I'm not sure who exactly is on the deed at the moment but the house is split one third to the Mam and the other two thirds between the kids and it's a big family so each kid has less than 10% each. It's a big house in Dublin so it would be worth a fair wedge, definitely over €400k.

Your second line was my understanding. That each kid could theoretically just give the Mam €3k a year (their total share would be less than €32k I'd say) but sure you'd be waiting ten years and she's obviously going to need a house as soon as the current house sells.

Yeah, fully aware of the capital gains implications. Some of the kids are still living there and won't have to pay it as it's their principal residence, others will have to pay it.

Spanish Eyes

Just being nosey, but why exactly are they selling the property now? Is it because one or more of the children want to cash in their share?

These situations are so convoluted and sad in a lot of ways, given the grief sorting it out brings with it.

There is one other option, and that would be for Mam (and children who wish to leave Mam there) to buy out those who want to sell now. But there may be more to it.

Obviously a good bit of legal advice is worth the money in these circumstances. Just saying!

troyzer

https://www.boards.ie/discussion/comment/118357111#Comment_118357111

The Mam is retiring and COVID has allowed the remaining kids to work from home permanently so living in Dublin isn't really necessary anymore. The house is far too big and is also getting on a bit, is expensive to maintain and it does need a bit of modernization. The kids who want to cash in aren't exactly objecting!

Mam has no interest in staying and it would be too expensive to buy out the the rest of them.

Emma2019

Gift from child to parent is Category B. So each child can gift her 32.5k worth of cash/assets without her incurring CAT (e.g. 3 kids is 67.5k)

They may incur CGT on the disposal to her (difference in value when they inherited vs when they disposed of it). If they do have to pay CGT, the tax they pay can be used as a credit against the CAT the mother has to pay (if any).

Benny122

Hi guys I want to ask a question.

If a sister dies and leaves her estate to her brother including a house in which there is a tax bill of €50k - could that person rent the property and pay the tax bill back over time or does the tax bill have to be paid in full

Geuze

AFAIK, CAT must be paid fairly soon after the inheritance, I'd say within a year.

Geuze

https://revenue.ie/en/gains-gifts-and-inheritance/gift-and-inheritance-tax-cat/index.aspx

How and when do you pay?

Use the IT38 Form to file your CAT return.

If the valuation date falls between:

• 1 January and 31 August, you must pay by 31 October of that year
• 1 September and 31 December, you must pay by 31 October of the following year.

You can pay your CAT online, with a debit card, or by Electronic Funds Transfer.