Q: My husband and I own our family home. We also have second property which we use on and off during holidays. I inherited this second home from another family member. We have only one child and I want to help her when we pass on. I wonder if we could do anything now to help her alleviate the tax liability which will arise?
Dear Reader,
The first step to do in situations such as this is to sit down with your own solicitor or tax advisor to ensure that you receive advice tailored for you and your family. Every situation is different, and the exact advice would depend on how you hold the property, your daughter’s own situation, and the needs of all involved.
In general terms, any gift or inheritance received by any person is subject to Capital Acquisitions Tax (CAT) in the hands of your daughter. The amount payable by your daughter is dependent on value of the gift or the inheritance, and the tax-free threshold.
At the moment, she is entitled to receive – from her parents, over the course of her life – s total of €335,000 before paying any CAT. Any value over the threshold will attract tax at the rate of 33 per cent.
There are carve outs in respect of a dwelling home – but again these vary greatly depending on whether a home is given as a gift or left on inheritance, and your daughter’s own circumstances.
You could, at this stage, gift the family home to your daughter subject to a right of residence for you. This right of residence would have a value which would be deducted from the overall value of the gift to her. However, disposing of your family home – even to your only daughter – is a big step to take for you and your husband.
If you do give a gift to your daughter while she is alive, the first €3,000 of the same is exempt. This is an annual exemption.
You should also bear in mind that if you do give a gift while you are alive, you and your husband may be liable to Capital Gains Tax (CGT). That does not apply if you gift your family home as it is your principal private residence, but may apply if you gift the other property.
It is also important to note that it has been heavily implied that there will be significant CAT changes in the upcoming budget. While, naturally, the precise details have yet to be announced, it may be the case that the thresholds will rise, that the rate of tax decrease, or that there would be substantial carve outs in respect of the family home.
