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Q. I am a grandmother. I want to give some money to my 3 grandchildren. Will they have to pay tax on this or would it be better for them, in terms of tax, to wait until they inherit from me ?
A: it depends on what amounts you wish to give them. In terms of passing on money to your grandchildren, from a tax point of view, the receipt of this money will be treated as a gift if given to them while you are alive, or as an inheritance if by way of a bequest under your will.
A very effective way of giving some money to your grandchildren is to use the annual Small Gifts Exemption where you can gift up to €3,000 per person per annum without incurring any tax liability for the grandchildren. So you could gift up to €9,000 in total to your 3 grandchildren without them being liable to tax. In addition this will not affect or reduce their Capital Acquisitions Tax threshold outlined below.
If your grandchildren are very young, you may consider using the annual Small Gifts Exemption by setting up a regular savings plan for them with the money held in trust for them until they are 18 years of age.
Taxation of Gifts and Inheritances
A liability to gift tax arises when a person receives a benefit liable to Capital Acquisitions Tax (CAT) other than on death. Both gifts and inheritances are subject to Capital Acquisitions Tax rules and are effectively treated as one and the same from a tax perspective. Capital Acquisitions Tax is charged at 33%.
There are tax-free thresholds which apply for Capital Acquisitions Tax depending on the relationship between the person giving the gift or inheritance and the recipient. The threshold between a grandparent and grandchild comes under the Group B threshold which is €30,150. This means that the recipient can receive gifts or inheritances from all relevant donors within the Group B threshold up to a cumulative total of €30,150 tax free. Relevant donors under Group B are gifts and inheritances received from grandparents, brothers, sisters, uncles, aunts.
Therefore, in this case, if your grandchildren have received previous gifts or inheritances from other Group B donors then the total threshold available, €30,150 will be reduced by that amount.
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Money Plus are experienced investment and financial brokers and have been in the business of financial and investment planning for many years. They are dedicated in providing bespoke financial planning advice to clients. If you would like further advice on the above or any other financial information please contact Belinda McCauley in our Boyle office on Bridge Street on 071 9194000 or [email protected]
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