Question regarding inheritance tax /transferring ownership of assets UK & Ireland

icecreamketchup

My Mother is an 80 year old widow, my father having passed away in 2018, leaving all his assets to Mum.

She lives in the home we grew up in, in N. Ireland, probably valued ~ £220k

She also owns a holiday home in Donegal, in the Republic, valued ~€250k

She probably has £100k in savings

So UK savings & asset might equal £320k which is below the UK inheritance tax threshold of £325,000

I have 5 siblings, and my parent’s intentions were always to sell & divide equally whatever assets they have when they’ve passed.

My Mother is becoming anxious that we’ll end up losing out on a lot of the value of our inheritance on inheritance tax once the houses are sold.

She’s also fearful that as she gets older, something could happen with her health meaning she has to go to a care home - & there’s the fear her assets would need to be sold to pay for this.
She's hearing from her friends that they've "signed over" their homes to their children already etc. to avoid this (I appreciate this is a contentious topic)

She has suggested transferring the ownership of her 2 properties over to us now – 1 property to 3 of us, and the other to the other 3

This is something she has heard other people have done to avoid the scenario of selling them if she had to go to a care home – anyone know the pros & cons of this?

We’re really unsure about the house in Donegal, and what IHT would need paid on that if she passed away.

2 of my siblings are based in the Republic of Ireland while the rest live in Northern Ireland.

Alternatively, she has suggested selling the house in Donegal now, as we're not really getting the use out of it, and transferring ownership of the NI house over to 1 or all of us.

If she sold the Donegal house now, she would have capital gains tax to pay in RoI, and then I assume if she brought the remainder to her NI account, there may be taxation also?

Some of my siblings are under the impression that she is missing out on some benefits regarding pension credit because of the her asset in Donegal? I'm not even sure if the UK government are aware of she has the house in Donegal, so not sure how that's the case, but I'll take it that it is.

I'd appreciate any advise you all may have

Keep_pedalling

Giving her properties aware to avoid care costs would be very foolish. For a start it would be deemed as deliberate deprivation of assets by the local authority, and frankly she should be more worried about having to rely on a cash strapped LA to fund her care rather than self funding.

Her total estate would be well outside UK IHT, but the RoI property may be subject to Capital Acquisitions Tax on her death or if she gives it away now. Is anyone currently occupying that property.

mta999

1. The house in RI (and indeed all of your mother's worldwide assets) will be taken to account when calculating inheritance tax. I'm assuming she is resident in the UK for tax purposes

2. Your mother is free to give away houses as she wishes but should she need means-tested support it is likely that this will be regarded deliberate deprivation of assets

3. If she does give away her house then it will be no longer her primary residence (as she does not own it) and therefore there will be a capital gains tax calculation to be made when it is eventually sold

4. If she sells the house in RI then she will need to make a capital gains tax calculation there but there would be no taxation on bringing the proceeds into the UK

5. If your mother is claiming means tested benefits without declaring all her world wide assets then that is a criminal offence. If on the other hand she doesn't claim yet but plans to after giving her house away then that is not possible as it is deliberate deprivation of assets

It may sound harsh but your mother should organize her affairs as she sees fit but if she has money spare she should live off that and her estate should pay the proper amounts of inheritance tax on the remainder of her assets when the time comes. Anything else is doomed to to failure!

RAS

As a widow leaving her home to descendants, your mother's estate has an IHT allowance of up £1m. Her current estate is way below that.

We see a lot of these schemes designed to avoid IHT and care home fees which end up with the children having to pay tax which was not due had the deceased not schemed.

If she sells the house in Donegal, there will probably be CGT payable now (check the RI rules). If she still owns it on death, there is no NI tax of any sort to pay (again check the RI rules).

If she gives away the houses during her life, then the sales by her children will be subject to CGT.

If she gives away a house and lives in it, it remains part of her estate for IHT purposes anyway.

That's before you start getting into deprivation of assets. Any means-tested assessment will check if she ever owned property and what has happened to it. Giving away assets to obtain benefits or avoid care fees is deprivation off assets. So the authorities will assume that she still has the money and refuse to fund the services.

Most people do not go into a care home, it's about 30% and many only stay for a few months. Others here have also pointed out that having the assets to choose a home is invaluable. Authorities dealing with those who have no assets will delay admission as long as possible and then choose the cheapest option.

Do you all really want years of stress and distress for mum and yourselves caused by repeated caring issues, followed by a stay in Drop Dead Grange? Or to ensure that she has the care needed at home and the nicest possible care home if she ever needs it?

Edit: Hoping she has got a Power of Attorney sorted out, hopefully with two people who currently provide most support?

poseidon1

Your mother and family both in RI and UK must take expert cross border tax advice from an individual with competency in both jurisdictions, before taking any precipitous action such as selling or gifting the Irish property.

This is because your mother will not only have Irish CGT on a potential sale ( or gift) of the property, but also UK self assessment CGT reporting in the UK on the same gain (although there should be a credit given for CGT paid in Ireland).

As for gifting, under certain circumstances Irish resident recipients of gifts from non Irish residents can attract Capital Acquistion Tax ( CAT ) at a rate of 33% subject to a 3000 euro exemption per person. However the CAT paid can potentially attract a tax credit on behalf of the irish recipients where the gifted funds derived from an asset sale that previously attracted Irish CGT. See below -

https://www.revenue.ie/en/gains-gifts-and-inheritance/credits-you-can-claim-against-cat/credit-for-capital-gains-tax-cgt.aspx

Therefore trying to stucture a sale/gift of the property with the objective of achieving a positive or at least tax neutral outcome for the Irish Resident children is a complex excercise, even without taking into account UK tax considerations on a disposal/ gift of the same asset.

As Regards your mother's home and any thoughts of her gifting her ownership ( for any reason), as outlined by other contributors to this post this can be summarised by the simple advice to don't do it.

Suggest you heed @ Keep_pedalling's inference that your mother's worldwide estate should have up to £1million in UK exemptions on death to avoid any question of UK Inheritance tax on all her assets wherever situated.

Therefore the only compelling issue to address and plan for ( via appropriate professional advice), is Ireland's death duty regime which imposes potential liabilties on the Irish Resident beneficiaries subject to their individual exemptions.