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Thursday, July 26, 2007
Transferring property
June O’ Hanlon practises in Doyles Solicitors mainly in the areas of conveyancing, litigation and family law.
In this column she advises a woman on the implications of her mother transferring a property to her.
June O’ Hanlon can be contacted at the offices of Doyle Solicitors in Wexford on 053 9123077 or in the office in New Ross on 051 425809.
Q :I have been living with my elderly mother for a number of years and she has now gone to live in a nursing home because I am unable to look after her any longer. My mother wishes to transfer her home to me before her death as the property has become quite run down and I need to raise a mortgage to carry out the necessary renovations.
I do not own a house. Can you please advise on the tax implications of the transfer or would it be better for my mother to leave the house to me in her will. There are three taxes to be considered by your mother and you on the transfer of a property: Stamp Duty and Capital Acquisitions Tax (i.e. gift tax) for you and Capital Gains Tax for your mother. A Firstly, there will be no Capital Gains Tax liability for your mother if she is disposing of her principal private place of residence and there does not appear to be development potential in the property. If you are a first-time buyer then there will not be Stamp Duty to pay on the transfer either.
There is the question of gift tax. A child currently has a tax free threshold of €496,824 from a parent before gift tax becomes payable. Even if the property is not worth that, you may want to consider if you can avail of the Dwelling house Exemption so that you do not use up your entire threshold.
If you have lived in the property as your only or main residence, which appears to be the case, then you may be able to avail of the Dwelling house Exemption if the property is being transferred into your sole name, providing certain conditions are met.
In order to qualify for the exemption there is a requirement that the house must have been owned by your mother for a three-year period prior to the gift to you. You do not say whether this is the case but I am assuming it is.
However, any period of occupancy by you in a house where you resided in that house with your mother, i.e. in your mother’s principal private residence, will be disregarded for the purpose of the relief unless your mother was compelled, by reason of old age or infirmity, to depend on your services for that period. I believe in your case, especially if your mother was not in good health, that you could make a good argument to the Revenue Commissioners for the exemption to apply.
There are a number of other conditions which must be met. For example, you must not have an interest in any other house when the gift is made. Unless you are over the age of 55 when the transfer is made, then you must retain ownership of the property for a further six years.
If not, the Revenue Commissioners will be entitled to claw back the exemption.
However, this would not apply if you yourself needed longterm care in a hospital or nursing home, or if you were required by your employment to live somewhere else. While you must continue to occupy the house as your only or main residence for six years from the date of the gift, you can own other property including a house during this time.
You are entitled to sell and replace the house in certain circumstances without the exemption being clawed back at all or in full.
Based on the facts given, there is no difference in the tax payable whether your mother makes the transfer now or leaves the property to you in her will. Of course, if you intend to raise a mortgage then the Bank will require that the property is transferred into your name at this time.
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