My daughter and her husband live in a house that her husband owned for a number of years before they got married. Only his name is on the deeds of the house.

If I now buy a house and they were to move into it for a period of three years can I then transfer this house to my daughter only and they continue to live in it for a further nine years and avoid affecting her Capital Acquisition Tax allowance.

Even though her name in not on the deeds of their present house is she considered to have an interest in her husband’s house?

Mr T.M., email

As it stands. probably yes. But it is precisely such manoeuvring that has raised the hackles of Revenue to what it believes is large-scale abuse of the dwelling-house exemption.

The exemption was originally brought in specifically to prevent a situation where someone could potentially spend many years caring for old or infirm parents or relatives – in many cases sacrificing the chance of financial independence by doing so – only to find themselves out on the street when those elderly people die because they could not afford the inheritance tax bill on the property that the parents or relatives had passed to them.

However, the wording of the legislation is sufficiently loose that it has effectively allowed a coach and four to be run over the spirit of the measure by better-off parents looking to provide for their adult children in a tax-efficient manner.

This practice appears to have increased since the Revenue tightened up other schemes under which more affluent parents were effectively paying in cash for the upkeep of supposedly independent adult children.

Allowance

Be that as it may, as long as your daughter has no interest in any other property or is entitled to an interest in another property – which is where things might get interesting – it will not affect her capital acquisition tax allowance. The other rules, as you note, are that she lives in the property you purchase for at least three years before she “inherits” and for a further six years thereafter. That allowance currently means she can inherit up to €280,000 from her parents without paying capital acquisitions tax.

But that may change. As it stands, the Government has signalled fairly clearly that it intends to increase the threshold on the amount a child may inherit or receive as gifts over their lifetime from parents.

But it would not be a surprise if, alongside any such increase, Minister for Finance Michael Noonan clamped down on precisely the arrangement you propose – either in the budget itself or, more likely, in the Finance Bill that follows it and is designed to implement changes announced on budget day and any further measures that need "cleaning up".

Given the timing, you might at least see what the Minister has to say in his budget speech before deciding whether to proceed with your plan.

Interest

On the second point you raise, your daughter does not necessarily have an interest in her husband’s house but she may have.

If the house were in joint names, the situation would be clearer. As it is, if the question was put to the test – for instance, in the event of separation – it would be a matter for the courts to determine. Equally, in this case, it is possible that the Revenue could challenge her eligibility to the dwelling-house exemption by virtue of an “interest” in the existing family home.

The traditional test for the courts is whether a spouse or partner not named on the deeds has contributed directly or indirectly to the family home. It is open to the court either to transfer a home into the name of two owners or to one owner, depending on circumstances.

Of course, by the same token, if you were to put the new home into her name only, her husband would have no automatic right to a share in the property. But by moving into that property and making it the family home, their existing home in his name would be deemed an investment property and that could have implications if it were later sold. As that is in his name only, any tax implication might fall only to him and it is questionable whether he would consider this a prudent approach.

Risk

What you are suggesting effectively means your daughter’s husband putting himself at risk of financial disadvantage for zero benefit. I’m not sure why he should agree.

As a general rule, I would suggest any home of a married couple or civil partners should be in both names. It makes things easier all round but also avoids the desperate uncertainty that can otherwise prevail for one party. And to make it even easier, the Government won’t even charge for adding a spouse or (I believe) civil partner to the property.

Of course, for most couples, any mortgage lender will insist on the property being in both names as a a condition of mortgage drawdown.

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