Capital Acquisitions Tax/Gift Tax legislation allows for an exemption for the first €3,000 of any gift taken by a beneficiary from any one donor. This is an annual exemption, which means that a beneficiary can receive up to €3,000 tax free in any one year from any donor, or even multiple donors and this gift will not impact their tax free threshold for Inheritance
Practically speaking this means that parents, grandparents, aunts and uncles can gift money to children. Each adult can gift each child up to €3,000 in any year with no tax liability for the child and without reducing the amount the child can ultimately inherit tax free.
For example, each grandparent could gift €3,000 pa to a grandchild, totalling €6,000 thus enabling them to gift €60,000 over a 10 year period. Importantly, this would not impact the grandchild’s tax free inheritance threshold of €30,150.
It must be noted that the ownership of the money comprising the gift has to clearly pass to the beneficiary ie. into a bank account in the beneficiaries’ name.
If a grandparent wishes to gift the monies to their grandchild on an ongoing basis, they can do so through by affecting a savings plan for their grandchild. There are various ways in which to do this either by a Deed of Assignment or a Bare Trust but ultimately the grandchild is the beneficiary.
Given that Gift and Inheritance tax rates have now increased to 33%, for many people it may be worth using the Small Gift Exemption as a long term inheritance tax planning tool. The gifting of the €3,000 on an annual basis is exempt from Gift Tax and as above, crucially it does not ultimately reduce the amount that the child can inherit.
