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Selling a family home under a will and stamp duty

Q&A: The wording of the will determines how much tax will have to be paid

Our Mother passed away and left the following passage in the will. “I direct that my house ...be sold and that the proceeds of the sale be divided amongst my five children in the following shares”

Child A 6.5 per cent;

Child B 6.5 per cent;

Child C 6.5 per cent;

Child D 40.25 per cent;

Child E 40.25 per cent.

All the siblings, one of which is the executor, have agreed to the following. Child D to purchase their share of the family home at market value.

I am getting different views on the stamp duty that is due. Is it:

1. Stamp duty is liable on the full value of the home?;

2. Stamp duty is liable on the full value of the home, minus 40.25 per cent?

Mr I.C., email

Your mother was clearly a woman of great precision. And the wording of the will and the actions it requires will determine the stamp duty position. Depending on the value of the property, it might have been easier all round had she simply left it to Child D but we’re all wise after the event.

The issue of stamp duty on a property which is owned by more than one person is increasingly topical as many people bought property with friends or partners in the run-up to the Celtic Tiger (and again now) as it was the only way that they could afford to own a home.

In today’s market, where mortgage payments are considerably lower than market rents on the same property, it makes perfect sense to try to do so even if the banks are noticeably more cautious in assessing mortgage eligibility among multiple owners – especially when they are not a couple.

It is also relevant, clearly, where a person leaves the family home to more than one of their children. This is something that people should consider very carefully.

Family home

I understand that, for a lot of people, the family home is the main or sometimes only asset remaining for passing on through inheritance. With many people having access only to the State pension and people living longer than heretofore – and often requiring access to private sector care or rising medical bills – a person’s liquid assets, i.e. cash and savings, can often be required for living. And that should be the first priority for older people, not leaving an inheritance for already adult children.

In such cases, almost always, it makes sense for one of the family to buy the others out.

But in circumstances where there are assets other than the family home, it can make more sense to allocate the home to one person and cater for the others through other available assets. I come across an awful lot of letters from readers where the leaving of a home to multiple children causes much discord, family rupture, misery and cost.

Will dictates sale

Fortunately, in your family, there is no dispute. And in any case, the terms of your mother’s will carefully ensure there cannot be. Clever woman. She has dictated that the house be sold, not that it be left to all of you. The allocation of shares she sets down in the will clearly relates to the sale proceeds of the property.

But that does, in my view, affect the position on stamp duty.

All five siblings are happy to agree to Child D acquiring their share in this home and, more importantly, Child D has either the assets or access to a mortgage that will allow them to do so.

If you had all inherited the property in the shares outlined and Child D then simply acquired the shares of each of the siblings, stamp duty would be payable by Child D on each of those purchases – cumulatively 59.75 per cent of the property.

However, the entire property is being sold and, in those circumstances, I cannot see how stamp duty is not payable by Child D on the full sale price of the property.

As it stands, Child D does not own the property – or 40.25 per cent of it. None of you own the property. It is part of your mother’s estate and does not become the property of Child D or anyone else unless and until they purchase it.

You entitled your query “stamp duty and inheritance”. Though this is an inheritance issue and property transferred under a will or intestacy does not attract stamp duty, this property is not transferring to any of you; it is being sold in accordance with the terms of the will.

It could be acquired by anyone and if it was, they would be liable to pay stamp duty on the purchase. The only difference in your case is that the family – with the agreement of the executor – is conducting a closed sale where the property is available only to Child D, not the open market. However, logically, the principle must be the same in terms of stamp duty liability.

One final thing to remember. You mention it yourself and that is market value. Revenue Commissioners will assess stamp duty on the full market value of the property. If they suspect that the property has been sold at a discount to accommodate family priorities in a closed sale, they are entitled to commission their own valuation and charge stamp duty at the value it determines.

To avoid any complications, I would suggest the executor secures a formal valuation for the family home from a professionally qualified valuer, just in case Revenue queries the sale ... and use this as the basis of the purchase by Child D.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice