Uncle wants to give me his house as he’s in a nursing home
Q&A: Dominic Coyle answers your personal finance questions
Even in Longford, which had the lowest median price in March, at €113,750, you’d be looking at a bill of €26,812 and that could rise as high as €167,475 if the property is in the Dún Laoghaire area where the median price is as high as €540,000
My uncle has recently gone into a nursing home and is paying for it out of his own funds.
He made a will a few years ago and has left me the house on his death. He no longer wants to maintain the house and bills associated with it and has asked if he can transfer the house to me now. Is this a good idea or would it be better to leave the original arrangement?
I cannot be certain, but think he has enough personal funds to pay the nursing home for his future care.
As it stands there is a lot of maintenance issues with the house – i.e. insurance, leaks etc. I do not know what to do about these as don’t know if State will take the house in the future. My uncle has no children of his own and his wife is deceased.
Ms J.S., email
People make decisions in their wills for the best of intentions. They’re looking to take care of those they love but those loved ones can be left with some unwelcome bills. And, in your case, the issue is complicated by the fact that your uncle is looking to act now where he may need to have future recourse to the State to fund his nursing home care.
There are a number of issues involved in the scenario you outline and it’s best to go through them one-by-one.
First, most critically, if the property is transferred to you now, it could come accompanied with a sizeable tax bill.
Gifts made during someone’s life are treated the same as inheritances by and large. Both come under the capital acquisitions tax regime, both use the same set of exemptions to tax depending on your relationship to the person making the gift/inheritance, and both use the same tax rate on any amount liable – 33 per cent.
To be fair, the tax issue will also arise if you wait until your uncle dies and then inherit the property
In this case, as you are inheriting from your uncle, the transfer will be treated under the category B threshold which in general terms covers close relatives who are not children of the donor.
Under category B, you are entitled to receive gifts and inheritances up to a maximum of €32,500 before you pay capital acquisitions tax (also known as gift tax/ inheritance tax).
The thing is that the threshold is cumulative. This means that the value of this property must be added to anything over the value of €3,000 that you have received as a gift from a grandparent, any other uncle or aunt, or any brother or sister, and any inheritance you got from anyone in those categories as well.
Now clearly a property like this is, on its own, going to push you well over the category threshold. But if you have previous gifts and inheritances from these close relatives, you may not even have all or any of the €32,500 lifetime tax-free threshold to play with to reduce the tax liability.
You don’t say what the value of your uncle’s home is but unless it is a derelict shell – which it isn’t – the tax bill will be substantial. The most recent property price data from the Central Statistics Office says that the median house price nationally in March of this year was €262,500, while, in Dublin, it was €390,000.
On that basis, even if you have the full tax exemption available to you, you would be looking at a tax bill of anywhere between €75,900 and €117,975.
Even in Longford, which had the lowest median price in March, at €113,750, you’d be looking at a bill of €26,812 and that could rise as high as €167,475 if the property is in the Dún Laoghaire area where the median price is as high as €540,000.
And there are deadlines on when you have to pay. So, if the property was transferred to you before the end of August, you’d have to file a return and pay the bill by the end of October. That deadline extends for a year to October 31st of next year where the transfer takes place between September 1st and December 31st this year.
Either way you look at it, it is a big ask and could involve you having to sell on the property which might run counter to your uncle’s intentions and cause unnecessary tensions.
To be fair, the tax issue will also arise if you wait until your uncle dies and then inherit the property. However, that would give you more time to prepare and, assuming you don’t want to sell the property, find the wherewithal to pay any tax due.
You sensibly raise the issue of the uncertainty surrounding your investing in this property even after a transfer. Your concern is that the State might come looking for the property in the future.
This relates to the Fair Deal scheme, which provides State funding for nursing home care. And you’re right to suspect that, should your uncle need to turn to this funding scheme, there could be a clawback arrangement. However, it would not, as you fear, involve the State taking ownership of the property.
What does happen is that, under Fair Deal, the value of any assets disposed of in the previous five years are considered in assessing the financial contribution of the nursing home patient. So, while they would not come looking for the house, they would assess its market value at the time it was transferred to you as part of his savings and would require 7 per cent of these notional financial assets to be paid by him every year towards the price of his care alongside 80 per cent of any actual cash income he has.
But the family home is protected under Fair Deal. As long as he continues to own it, the 7 per cent charge is levied for only the first three years of his care under Fair Deal and it is not collected until he dies and the asset is disposed of.
If there is any chance he will need to turn to Fair Deal, it makes sense for him to keep ownership of his home even if it lies idle.
Finally, though not strictly part of your question, there is the issue of why your uncle is not availing of Fair Deal. People do get suspicious of State interference in their finances and can sometimes assume they will be ripped off. There are also those who are, in principle, opposed to relying on the State when they do not need to be.
From your own point of view, taking the home now leaves you with a substantial tax headache even before you look at any ongoing maintenance costs
However, for most people, Fair Deal will reduce the cost of care. A nursing home bed will cost close to €1,000 a week, or €52,000 a year. And that’s just the basic. Most additional activities and comforts – hair cuts, a newspaper, etc – will be added to that.
Unless your uncle has extensive income and assets – and a home that requires repairs and which he no longer wants the financial burden of does not point to such a position – he is paying far more himself than he would ever be charged under Fair Deal.
He may have enough resources to meet the cost, though you’re not sure, but he may not. The average long-term nursing home stay is about three years but clearly it can be far longer.
If he gets rid of the home and has to turn to Fair Deal, things could get messy for him. From your own point of view, taking the home now leaves you with a substantial tax headache even before you look at any ongoing maintenance costs. Unless those financial burdens are not a concern for you, I’d think twice about transferring ownership now. And, from your uncle’s point of view, there’s an argument for not doing so regardless, even if that might cause some stress with him.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email email@example.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into