Deciding whether it’s better for your parents to transfer their property to you now or through their will is no small matter. Tax implications, legal conditions, and financial consequences can be complex. To make the best choice, you need to understand the key tax rules and explore which option is more advantageous for your situation.
This guide breaks down the critical concepts of transferring property in Ireland and provides much-needed clarity on capital taxes such as Capital Gains Tax (CGT), Capital Acquisitions Tax (CAT), and stamp duty.
Understanding the Tax Landscape
When transferring property in Ireland, whether as a gift during the owner’s lifetime or as an inheritance after their passing, several taxes come into play. Each option has implications depending on your personal circumstances.
Transferring the House During Parents’ Lifetime
If your parents decide to transfer their house to you while they’re still alive, it will typically be treated as a gift. This means specific taxes apply, such as CGT, CAT, and stamp duty.
- Capital Gains Tax (CGT): Your parents may face CGT if the house’s value has increased significantly since they purchased it. However, there’s good news—if the property has been their Principal Private Residence (PPR) for the entire ownership period, they can claim PPR relief, eliminating any CGT liability.
- Capital Acquisitions Tax (CAT): As the recipient, you may owe CAT on the gift. After Budget 2025, the Group A threshold for a parent-to-child transfer is now €400,000, meaning you can inherit or receive a gift worth up to this amount tax-free. If the property exceeds this threshold, CAT of 33% applies to the remaining value over €400,000. Additionally, you and your parents can use a €6,000 annual small gift exemption to slightly increase the tax-free value to €406,000.
- Stamp Duty: Stamp duty remains payable at the standard rate of 1% for properties valued up to €1 million. This cost falls on the recipient (you).
Transferring the House via a Will
If your parents pass the house to you as part of their will, it’s considered an inheritance, which has different tax implications compared to a gift.
- Capital Gains Tax: There’s no CGT when inheriting a property at the time of transfer.
- Capital Acquisitions Tax: CAT still applies, with the same €400,000 lifetime threshold and 33% tax rate for anything above it. However, you may qualify for the Dwelling House Exemption, allowing you to inherit the property without paying CAT under specific conditions. This includes living in the house for at least three years before inheritance and not owning any other property.
- Stamp Duty: Good news—stamp duty is not charged on inherited properties.
Key Considerations When Deciding
1. Current vs. Future Property Value
If the property’s value is likely to increase significantly, transferring it now could be a smart move to reduce future tax liabilities. A higher property value over time could result in more CAT being owed upon inheritance, especially if it exceeds the threshold.
2. Parental Residency Rights
Transferring the property now doesn’t mean your parents have to move out. By granting themselves a nonexclusive right of residence, a portion of the property is excluded from being treated as a gift, deferring some CAT liabilities until after their passing.
3. Eligibility for Dwelling House Exemption
If you meet all the conditions for the Dwelling House Exemption, inheriting the house could mean avoiding CAT entirely—something worth considering.
4. Personal Tax Threshold & Previous Gifts
It’s important to consider if you’ve already used any of your €400,000 tax-free threshold for gifts or inheritances from your parents. Any previous amounts will reduce the remaining balance for future property transfers or inheritance.
5. Administrative Simplicity
Inheritance tends to be more straightforward from a tax administration perspective, as there’s no immediate need to pay CGT or stamp duty. However, careful planning is still crucial to avoid tax burdens.
Expert Advice for Smarter Decisions
The question of whether it’s better for your parents to transfer their house to you now or leave it in their will doesn’t have a one-size-fits-all answer. Every family’s situation is unique, influenced by factors such as property value, additional assets, and your long-term plans. Strategic estate planning and professional advice can save you substantial tax costs and ensure your family’s assets are protected for generations.
If you’re facing this difficult decision, consider reaching out to an experienced estate planner or tax advisor. Specialists can evaluate your specific circumstances, keeping tax laws, inheritance thresholds, and family goals in mind.
Take the Next Step
Deciding when to transfer property may seem overwhelming, but with the right planning and advice, you can reduce financial burdens while preserving your family’s legacy.
Need help making the best choice? Contact one of our estate planning team today to ensure your family assets are protected while minimising your long-term tax liabilities. The right strategy today will lead to a brighter financial tomorrow.
