Tuesday 22 October 2019

Ask Sinead: Can we live free in the family home without my sister's tax affairs being affected?

'It's estimated there are thousands of families like yours.'
'It's estimated there are thousands of families like yours.'
Sinead Ryan

Sinead Ryan

Your home economics questions answered

Q My sister now co-owns our family home with my lovely mother who is now in nursing care. My sister lives in her husband's house and our family home has been idle for four years and my husband and I maintain it. However, my sister wanted us to move in and transfer the house to me with my mam still being owner. We both feel that it is ethically wrong to have the house idle. My question is that the house needs total renovation costing €100,000.

Can we move in and live free in the house without my sister's tax affairs being affected?

Answer: I am assuming your mother is in a nursing home under the Fair Deal scheme and this is why you are not selling or renting it as either would result in a liability toward her care. This is a common problem and it's estimated there are thousands of families like yours.

The big issue is that your mother may or may not have capacity to agree to your plan. If she does, then of course she and/or your sister can transfer the property to you. Depending on its value however, it could result in a Gift Tax liability for you. You are entitled to receive €320,000 tax free from your mother (an accumulation of all gifts/inheritances from a parent), but just €32,500 from your sister.

If she owns half the house, you may find a liability of 33pc tax on the balance over this amount. The house would need to change hands at what Revenue terms full open market valuation. If you are preparing to buy it from her, that's a different matter, but your email suggests otherwise, i.e. that you would get the house 'free' and do it up as your contribution. Revenue don't see it like that in terms of off-setting tax, unfortunately.

If your mother does not have capacity to make this decision and doesn't have an Enduring Power of Attorney to do it for her, then I can't see how a legal transfer can be made. In any event, it is a fundamental change in ownership of the property and may cause the bill for her care to become payable immediately under Fair Deal rules.

You can, of course, 'move in' to the property and make changes, but know that this is an internal family matter, and may be without your mother's explicit permission. Down the line, this may raise other problems for all of you. If you do live there rent free, the foregone rent is also considered a gift, and subject to similar rules.

So, it's not so much your sister's tax affairs you need to worry about, but your own, although there is a possibility that in 'improving' the home you are creating an asset for her and this may increase her Capital Gains Tax liability. If you proceed, talk with a solicitor to make sure you bed down all the documentation required so that it is not questioned later.

Email your questions to siryan@independent.ie

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