Question: My husband and I are in the process of transferring the farm over to our son before he turns 35 later this year. An issue that has cropped up is transferring the farmhouse. I am told that my son will have to pay tax unless I transfer over the house with the farm. While I do not want my son to pay tax, the prospect of not owning my home is making me very uncomfortable. My husband is telling me not to worry, but I cannot help feeling very vulnerable at signing everything away. Have you any advice?
Answer: This is an issue that comes up a lot in my office, the prospect of transferring the family home striking the fear of God into a parent, especially mothers. If that is the case, my advice generally is to retain ownership of the house. That said, it is worth laying out the options so that you can make an informed decision. Your options are either:
To retain the full ownership of the dwelling house and transfer all the land. To retain full ownership of the dwelling house and transfer some of the land. Transfer ownership of the dwelling house and retain either. A general right of residence. An exclusive right of residence/life interest. Tax implications of options
If the farmhouse is transferred at the same time as the land, it would qualify as an agricultural asset, and thus would qualify for Agricultural Relief. If the dwelling house was retained and subsequently passed under a will, it would no longer qualify as a farmhouse for the purposes of Agricultural Relief. However, if it passed with land around the house, it may still qualify as a farmhouse for Agricultural Relief (option 2 above).
I will illustrate this, by way of example. Say your son was being given a farm worth €1.5m and a farmhouse worth €300,000. If the house and farm was transferred at the same time, he would have no gift tax to pay. However, if the land was transferred and the house retained he would have €16,500 in tax to pay when he inherits the house. If the house was valued at €250,000 or less he would have no tax to pay. So you can see it’s not a huge bill in the grand scheme.
Furthermore, if you were to retain an exclusive right of residence in the dwelling house, that house would not transfer until some point in the future, and again, would not qualify for Agricultural Relief.
If you retained a general right of residence, ownership of the house would transfer and would qualify for Agricultural Relief.
Aisling Meehan, agricultural solicitors and tax consultants.
Legal implications of options
If you retain ownership of the house, you are entitled to do what you like with it as owner. If you retain an exclusive right of residence or a life interest, you own the house for your life and your son will automatically own it when you die. You cannot leave it to someone else under your will or transfer it during your lifetime.
If you retain a general right of residence, your son will own the house and you have a right to live in the house. However, this would mean that your son as the owner of the house, or indeed his successor in title, could move into the house or indeed could move others into the house as the owner of the home. You would not be legally able to prevent this if you only retained a general right of residence.
If the farmhouse is transferred at the same time as the land, it would qualify as an agricultural asset, and thus would qualify for Agricultural Relief
From a Fair Deal perspective, the house would be regarded as an asset and would be taken into account in terms of paying for nursing home care. If both parents were alive and in the event of either of them needing nursing home care, only 3.75% of the value of the house would be taken into account as an asset for the purpose of the Fair Deal.
This would be capped after three years, meaning that the house would not be taken into account for more than three years as an asset in paying towards nursing home care. By way of illustration, assuming the house was worth €300,000, 3.75% would be €11,250 per annum divided by 52 weeks. This would be a contribution of €216 towards nursing home care a week by virtue of retaining ownership of the dwelling house.
A general right of residence would not be taken into account. If you have a right of residence only, the HSE will need a legal document that states this.
Disclaimer: The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information contained in this article, Aisling Meehan, Agricultural Solicitors and Tax Consultants does not accept responsibility for errors or omissions howsoever arising. E-mail aisling@agrisolicitors.ie
Question: My husband and I are in the process of transferring the farm over to our son before he turns 35 later this year. An issue that has cropped up is transferring the farmhouse. I am told that my son will have to pay tax unless I transfer over the house with the farm. While I do not want my son to pay tax, the prospect of not owning my home is making me very uncomfortable. My husband is telling me not to worry, but I cannot help feeling very vulnerable at signing everything away. Have you any advice?
Answer: This is an issue that comes up a lot in my office, the prospect of transferring the family home striking the fear of God into a parent, especially mothers. If that is the case, my advice generally is to retain ownership of the house. That said, it is worth laying out the options so that you can make an informed decision. Your options are either:
To retain the full ownership of the dwelling house and transfer all the land. To retain full ownership of the dwelling house and transfer some of the land. Transfer ownership of the dwelling house and retain either. A general right of residence. An exclusive right of residence/life interest. Tax implications of options
If the farmhouse is transferred at the same time as the land, it would qualify as an agricultural asset, and thus would qualify for Agricultural Relief. If the dwelling house was retained and subsequently passed under a will, it would no longer qualify as a farmhouse for the purposes of Agricultural Relief. However, if it passed with land around the house, it may still qualify as a farmhouse for Agricultural Relief (option 2 above).
I will illustrate this, by way of example. Say your son was being given a farm worth €1.5m and a farmhouse worth €300,000. If the house and farm was transferred at the same time, he would have no gift tax to pay. However, if the land was transferred and the house retained he would have €16,500 in tax to pay when he inherits the house. If the house was valued at €250,000 or less he would have no tax to pay. So you can see it’s not a huge bill in the grand scheme.
Furthermore, if you were to retain an exclusive right of residence in the dwelling house, that house would not transfer until some point in the future, and again, would not qualify for Agricultural Relief.
If you retained a general right of residence, ownership of the house would transfer and would qualify for Agricultural Relief.
Aisling Meehan, agricultural solicitors and tax consultants.
Legal implications of options
If you retain ownership of the house, you are entitled to do what you like with it as owner. If you retain an exclusive right of residence or a life interest, you own the house for your life and your son will automatically own it when you die. You cannot leave it to someone else under your will or transfer it during your lifetime.
If you retain a general right of residence, your son will own the house and you have a right to live in the house. However, this would mean that your son as the owner of the house, or indeed his successor in title, could move into the house or indeed could move others into the house as the owner of the home. You would not be legally able to prevent this if you only retained a general right of residence.
If the farmhouse is transferred at the same time as the land, it would qualify as an agricultural asset, and thus would qualify for Agricultural Relief
From a Fair Deal perspective, the house would be regarded as an asset and would be taken into account in terms of paying for nursing home care. If both parents were alive and in the event of either of them needing nursing home care, only 3.75% of the value of the house would be taken into account as an asset for the purpose of the Fair Deal.
This would be capped after three years, meaning that the house would not be taken into account for more than three years as an asset in paying towards nursing home care. By way of illustration, assuming the house was worth €300,000, 3.75% would be €11,250 per annum divided by 52 weeks. This would be a contribution of €216 towards nursing home care a week by virtue of retaining ownership of the dwelling house.
A general right of residence would not be taken into account. If you have a right of residence only, the HSE will need a legal document that states this.
Disclaimer: The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information contained in this article, Aisling Meehan, Agricultural Solicitors and Tax Consultants does not accept responsibility for errors or omissions howsoever arising. E-mail aisling@agrisolicitors.ie
SHARING OPTIONS