Inheritance tax parents

[Younginvestor93]

In the absence of any further steps or information, yes, you are correct.

However, what happens in practice is that the parents lend the money to their son or daughter (and also, potentially, to their daughter-in-law or son-in-law).

They then write-off the loan over time using the €3,000 Small Gift Exemption.

For example, we were loaned a sum of money and each year the lenders write-off €12k of it or thereabouts. That’s €84k written-off since 2015, which otherwise would have been taxed at 33%. So the family has saved around €28k of tax.

That sounds reasonable. Of course, if the lenders were already maxing out the 3k small gift allowance every year to the lender, this would be a slight issue.

I always wondered, could an uncle and auntie give gifts of 3k each to young person looking to get on the property ladder and the parents could then immediately gift the money back to the auntie and uncle?
I wonder would revenue frown upon all these gifts, they would know what you are doing.

The reason for this is for the young person to get more money and the parents have already maxed the money they can give their child through the 3k gifts.

 

[Gordon Gekko]

No, a complete “ready-up” such as the example you’ve outlined would be challenged if discovered.

Any loan write-off tends to be in lieu of a regular cash gift.