We have received several minor enquiries this week, mostly related to the topic of giving gifts to relatives, with two particularly around the small gift allowance. I had a role in looking after a family member who passed away without a will. According to the intestacy rules, I am not eligible to claim any part of their assets. Nevertheless, a family member who will inherit has generously offered to give me an estimated amount of €20,000 in appreciation of my assistance.
My query is whether the annual €3,000 gift exemption can reduce the total amount subjected to the Group C threshold (in other words, identify it as a separate €3,000 gift and a €17,000 gift, which would mean €750 would be taxed instead of €3,750)? Although I predict the answer is negative, I wanted to clarify if this was possible.
Ms A.K. noted that Google celebrated 20 years showcasing an impressive growth of over 7,500% for its shareholders. Also, she pointed out that the fate of big tech companies was increasingly affecting our retirement savings and provided some tips to avoid overspending before salaries are deposited.
The small gift exemption of €3,000 does not apply to decrease the taxable value of the inheritance. However, such a scenario isn’t occurring here. Your relative passed away intestate and you’re not obtaining any legacy. Instead, one of the beneficiaries of the estate is proposing to present you with a gift worth €20,000.
In such conditions, you are permitted to claim the small gift exemption. This leaves you with a remainder amount of €17,000 which, provided the individual presenting the gift isn’t a blood-related uncle, aunt or grandparent, will be pitted against your lifetime category C threshold currently at €16,250.
Assuming you have not previously claimed any inheritance under category C or received gifts worth more than €3,000 that fall under this group, you will end up with a taxable gift of €750 (the surplus amount over the €16,250 threshold after applying for the small gift exemption) and a tax implication of €250.
Should you have previously utilised a portion of your category C threshold on significant gifts and/or inheritances from individuals outside your immediate family, the taxable part of the gift and the associated tax can be amplified – potentially to €5,610 if the entirety of the €17,000 sum (factoring in the small gift exemption) is subjected to tax.
Is it possible for parents to both issue a gift from a joint account?
As per current CAT guidelines, each person can grant a €3,000 gift allowance. What’s your interpretation of this regulation if a gift is sent from a joint bank account?
Let’s say, for instance, I’m able to receive €3,000 annually from both of my parents. Is it possible for this combined €6,000 to be transferred to me in a single transaction from an account in both their names? Or are they required to maintain separate accounts in their respective names and individually transfer the €3,000 to me?
Mr I.H.
You are indeed within your rights to accept €3,000 from either parent. The sole potential point of contention down the track is ensuring no basis exists for Revenue to dispute whether the money truly falls under the small gift exemption or if a portion of it should be deducted from your lifetime capital acquisitions tax threshold.
Do I foresee any challenges from Revenue regarding the €6,000 payment from a joint account being categorised under the small gift exemption? Quite frankly, I do not. Given that the account is held jointly with funds owned mutually, it’s entirely rational for them to dispatch the total from this account. In practical terms, one €6,000 payment makes the most sense.
However, should the €6,000 payout originate from an account solely in the name of one parent whilst supposedly being from both, I would anticipate queries from Revenue.
If you’re sceptical about this, there’s absolutely no issue with them making two distinct payments of €3,000 each from the joint account, although this increases paperwork and is really quite unnecessary.
There’s no legal necessity for them to conduct transactions exclusively through accounts held separately in their individual names. It’s quite a common practice for couples to maintain a communal bank account, especially when it comes to fulfilling mortgage repayments – lenders usually encourage this in married duos. Therefore, utilising this joint account for an annual trifling gift to you seems a logical approach.
We’re considering the option of getting a bank loan, in our names as parents, to provide a financial present to our son for house acquisition purposes. Essentially, the obligation of loan repayment will fall on us, not our son.
Is there any issue with us giving our son a fund of roughly €100,000 to aid in purchasing his house? Is there any action required from us or from him?
Mr J.M.
There’s no probable issue for you or your son in this scenario. In reality, these are two distinct transactions. First, you’re acquiring a loan from the bank, the repayment of which falls on you and your wife. This is perfectly lawful and holds no tax implications or any other concerns.
The fact that you’re using these funds to gift your son for his house doesn’t alter anything.
Also, gifting your son €100,000 won’t cause any problems for you or your wife.
The only consideration you need to make is whether you can afford it. Whilst the parental bank typically offers financial aid from existing resources, it’s a different degree of commitment entirely to willingly incur debt to provide assistance. It’s recommended that you take into account your present and future financial capability before proceeding with this decision.
As for your son, he’s allowed to inherit or receive gifts totalling up to €335,000 throughout his life from his parents tax-free. Moreover, upcoming budget deliberations might increase this threshold.
This contribution of €100,000 will be subtracted from his overall life tax-free limit. Nevertheless, being a gift, the initial €6,000 (€3,000 each from yourself and your spouse) can be excluded via applying small gift exception, stipulating that neither you nor your spouse has offered him a valid gift within this year already. This results in remaining €94,000 to be deducted from his limit, hence leaving him a balance of €229,000 for forthcoming usage.
It is not obligatory for either party to inform the Revenue or any other entity about this agreement, although maintaining your own series of documents – perhaps even in the form of email conversations – could prove to be beneficial for future references.
As I repeatedly point out, if this is when he needs the help, and you possess the means to assist, then the optimal utilisation of his limit is this.
If you have any inquiries, please get in touch with Dominic Coyle, Q&A, 24-28 Tara Street Dublin 2, or you can email at [email protected] mentioning your contact number. This column is a service for our readers, not a substitute for professional counselling.