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Child helping parents buy house

  • 31-01-2021 09:07PM
    #1
    Registered Users, Registered Users 2 Posts: 12,145 ✭✭✭✭


    My grandparents are looking to move into a bungalow as they get older and we have found a place just around the corner from where they live. There’s a bit of a cost difference with it but their daughter is in a position to fund this.

    We are just a bit unsure about how this works legally and for tax purposes, would there be a liability or would she have a share of the property? Ultimately she will eventually inherit a share in the property anyway


Comments

  • Posts: 0 [Deleted User]


    Gael23 wrote: »
    My grandparents are looking to move into a bungalow as they get older and we have found a place just around the corner from where they live. There’s a bit of a cost difference with it but their daughter is in a position to fund this.

    We are just a bit unsure about how this works legally and for tax purposes, would there be a liability or would she have a share of the property? Ultimately she will eventually inherit a share in the property anyway

    Does your mum have any siblings?


  • Registered Users, Registered Users 2 Posts: 12,145 ✭✭✭✭Gael23


    Does your mum have any siblings?

    Yes there’s 2 of them so ultimately she will inherit a share anyway.


  • Registered Users, Registered Users 2 Posts: 10,210 ✭✭✭✭Caranica


    First question is is she gifting this money or does she expect it to be added to her share of the property when that time comes?


  • Posts: 0 [Deleted User]


    Gael23 wrote: »
    Yes there’s 2 of them so ultimately she will inherit a share anyway.

    With the best will in the World, this could open a stinking can of worms. It needs careful consideration and legal advice. It could get very messy after grandparents pass on if not done properly now.


  • Registered Users, Registered Users 2 Posts: 12,145 ✭✭✭✭Gael23


    Caranica wrote: »
    First question is is she gifting this money or does she expect it to be added to her share of the property when that time comes?

    I guess we need to figure that out. Doing it as a gift would open up tax issues

    What would need to be done legally if she has a share of ownership to protect the interest of all parties?


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  • Registered Users, Registered Users 2 Posts: 469 ✭✭boege


    A friend of mine did this when her son helped her buy a house. They structured it as an agreement whereby he gets refunded the percentage of the proceeds of the house on her death (or I assume if the house is ever sold). There are three other siblings so it is all dealt with now with the contract. Technically the mothers estate is the balance after the contract is discharged. I don't remember all the detail but remember remarking to her that it was quite a commercial arrangement. They had a solicitor draw up the contract.


  • Registered Users, Registered Users 2 Posts: 27,278 ✭✭✭✭Peregrinus


    First, daughter needs to decide what she wants to do. Does she want to make a gift to her parents, or does she want to make a loan to be repaid in due course (e.g. if they sell the bungalow, or when the last of them dies) or does she want to buy a part-share in a bungalow with them? These are three very different things, with different implications for who owns the property and what, if anything, daughter ever gets back. She needs to think carefully and pick one and she needs to understand that, whichever one she picks, she is rejecting the other two - e.g. if she makes a gift, she can't expect it to work out later as if it were a loan or a part-purchase.

    You shouldn't be asking questions like " would there be a liability?" or "would she have a share of the property?" The questions to be asked are things like "Does she want a liability? Does she want a share in the property?" There's a good chance that this deal can be structured to give the daughter (and everybody else) what they want. But there is zero chance of that if people don't know what they want.

    When she has decided what she wants, then she needs to talk to her parents to see that they understant it, and that it is acceptable to them. Is it what they want too? If not, back to the drawing board.

    The, once she and her parents are agreed about what should happen, she needs to bring her two other siblings on board - they need to understand what the deal is and if they have problems with it, that needs to be identified and confronted now. They are probably not in a position to stop the deal but if they are brought onside now there is much, much less likelihood of a bitter family row over it in later years.


  • Banned (with Prison Access) Posts: 27 Davauer


    You pay gift tax about 35%


  • Registered Users, Registered Users 2 Posts: 12,145 ✭✭✭✭Gael23


    Things have progressed a little the last few days.

    Their daughter is in a position to buy the house and have a legal provision that they live there for the remainder of both their lives. Once it’s all in place legally it’s a really big opportunity financially for them because they don’t have a lot as regards income so having a substantial nest egg would really help


  • Registered Users, Registered Users 2 Posts: 1,618 ✭✭✭Ideo


    Gael23 wrote: »
    Things have progressed a little the last few days.

    Their daughter is in a position to buy the house and have a legal provision that they live there for the remainder of both their lives. Once it’s all in place legally it’s a really big opportunity financially for them because they don’t have a lot as regards income so having a substantial nest egg would really help

    You might be best to run this one by a tax advisor. As I understand, if a parent owned say a 2nd property and allowed their child to stay in it rent free, the parent would deemed to be giving a gift to the child equal to the market price of the rent. Your situation is the inverse of this, but I would have thought the same principle would apply and revenue might deem that your family member is giving their parent a gift and try to tax your grandparents on the ‘free’ rent they are receiving. I can’t say I’m 100% accurate here so that’s why I think it’s best for you to talk to a tax advisor.

    Btw, you Family member buying the property will be subject to capital gains tax on any profit on the sale of the property in the future as it will be deemed an investment property. Again, talk to a tax advisor about set up before arranging anything


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