My father who resides in a nursing home owns his house which he bought in 1982 for £60,000. He wants to gift me the house which is now worth £450,000. What tax liabilities do we have?
Ms MO'B, email
You certainly will have a tax liability, but there is a more serious issue to consider here. If your father is in a nursing home he may well be availing of State support for the costs involved through the Fair Deal scheme.
There are a lot of positives about this scheme, which, very broadly speaking, takes 80 per cent of a person’s income as a contribution towards the cost of care and leaves them with 20 per cent.
But, critically, there is also a charge applied against any savings or assets that he owns.
This charge is levied at 7.5 per cent of the value of his assets every year that he is in care. In the real world this means that savings and assets will eventually all be used to fund care if he stays long enough in a nursing home.
And why is this so important? Well, there is one key exception to the assets that are taken into account – the family home.
Where every other asset is assessed every year, the State is limited on how much it can charge the patient against the value of their family home. That limit is 7.5 per cent of the value of the home each year for the first three years of care only.
After that no further charge can be made against the family home – and the bill is not collected until the patient dies and the family home is sold off. So the maximum bill is 22.5 per cent of the value of the home.
A point to note – though it does not appear to apply to you – is that where a couple owns the home the charge against either one is capped at just 11.25 per cent – or 3.75 per cent per year for the first three years.
Now, if your father sells the home while he is in care or otherwise disposes of it – for instance by gifting it to you – the full value of the property is considered part of his savings, and subject to the 7.5 per cent charge as long as he lives in the nursing home.
In general, therefore, there is serious disadvantage for a nursing home patient in disposing of the family home.
Of course, if he is funding the full cost of his care outside Fair Deal then it is not something you have to worry about.
As far as you are concerned if your father did gift you the property it would exceed your lifetime tax-free limit on inheritances or gifts – currently €335,000 – by €115,000. As capital acquisitions tax is levied at 33 per cent, you would face a tax bill of €38,333.
