# childs education - deed of covenant



## mazg75 (16 Sep 2008)

My partner has a 10 year old child to put through secondary school soon and (hopefully) college. I have heard that I can sponser a non-relative through a legal 'deed of covenant', if i commit to x amount for 6 years.
Anyone have any idea if this is correct? What are the tax implications for him (lower wage bracket, paying 100p/w in maintenance) and me (upper tax bracket). He would like to send her to a private school locally but money will be an issue 
Googled deed of covenant and sites state it applies to incapacitated child or adult...does this purely refer to disability?
Hope this is the right forum....thanks


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## DrMoriarty (16 Sep 2008)

I'm afraid so; tax relief by deed of covenant for this purpose was abolished some years ago, AFAIK.

See [broken link removed] for current info.


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## mazg75 (16 Sep 2008)

Thanks for the info....guess its back to the old saving plan!!!
Appreciate the response. M.


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## Mark_Mc (16 Sep 2008)

Have you considered making a gift equal to the *annual* small gift exemption? Tax free in the hands of the recipient but out of taxed income in your case so not tax effective. by limiting to small gift exemption you are not eating into the tax free threshold for larger gifts/inheritances in the future.




mazg75 said:


> My partner has a 10 year old child to put through secondary school soon and (hopefully) college. I have heard that I can sponser a non-relative through a legal 'deed of covenant', if i commit to x amount for 6 years.
> Anyone have any idea if this is correct? What are the tax implications for him (lower wage bracket, paying 100p/w in maintenance) and me (upper tax bracket). He would like to send her to a private school locally but money will be an issue
> Googled deed of covenant and sites state it applies to incapacitated child or adult...does this purely refer to disability?
> Hope this is the right forum....thanks


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## mazg75 (16 Sep 2008)

Hadn't thought of small gift. Any idea of the annual limit?  I know its 250euro for employer gifts before BIK. Is there a cumulative limit over the years?
I want to ensure it goes on her education but would not have the full amount to pay for fees up front (unless I win the lotto!) Relations with his ex can be iffy enough (especially about money) as it stands....
I had hoped to go the covenant route as tax benefit would mean a greater fund in the end, plus it would have to be spent on education, but seems like I'm a few years late for that route.

Any further info re gifting would be appreciated.


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## Mark_Mc (16 Sep 2008)

Annual gift so each year is separate, i.e. Revenue don't add each year together. Yes, I know the limit. 3K per year. You could put a trust document in place between you and your partner stating that the fund (a bank account) is being created by you in favour of your partner's child to which an annual gift equal to (at most) the annual gift exemption. The trust document could make you/your partner the trustee and the trust document could state that the trust fund is being set up purely for the benefit of the child's education and that if it is not spent on the child's education it revert's back to you. The fund can then be invested year on year and perhaps grow. that would be 24K+ (8 years by 3K per year plus investment growth). 

Worth consulting a tax advisor offering wealth managment.




mazg75 said:


> Hadn't thought of small gift. Any idea of the annual limit? I know its 250euro for employer gifts before BIK. Is there a cumulative limit over the years?
> I want to ensure it goes on her education but would not have the full amount to pay for fees up front (unless I win the lotto!) Relations with his ex can be iffy enough (especially about money) as it stands....
> I had hoped to go the covenant route as tax benefit would mean a greater fund in the end, plus it would have to be spent on education, but seems like I'm a few years late for that route.
> 
> Any further info re gifting would be appreciated.


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## mazg75 (16 Sep 2008)

Thanks a mill for the advice Mark. Sounds like a good option.


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