In general, a gift from one individual to another may result in either Capital Acquisitions Tax (CAT) at 33% falling due, or a reduction in the recipient’s lifetime tax free threshold.
However, CAT legislation allows for an exemption from tax for the first €3,000 of any gift given by one individual to another, per year. There is no need for the recipient to be a relative of the donor and this exemption is “per transaction”. In other words, an individual can gift and/or receive up to €3,000 per annum to and/or from any or many individuals per year.
Each grandparent could gift each of their grandchildren €3,000 per annum resulting in a tax free gift to each grandchild of €60,000 over 10 years, without effecting their lifetime tax free threshold amounts.
Where gifting €3,000 to an adult, there are generally no issues. However, where you gift money to a child it is important that you clearly demonstrate that the child is the beneficiary of the funds i.e. a savings policy in their name. This type of policy can be arranged where the adult is the policy owner of the savings policy and once the policy is issued, the ownership of the contract is transferred to the child using a Deed of Assignment.
The Annual Gift Exemption cannot be carried over year to year if unused…. Use it or Lose it!
The above article is for general use only and does not constitute advice. It is accurate based on date of publication and further clarification on possibly rule changes should be sought.
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