Gordon Gekko
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No there wouldn’t
No there wouldn’tWell, there would be a potential CAT bill on the funds received from the child.....
You have no experience or understanding of these issues. The proposal is perfectly fine.Taking money from a child is not a "playbook". Dress it up however you want put it would be completely bogus
I wonder would it make more sense to take out a Section 72 policy to (perhaps partially) cover any future CAT bill?I am concerned about our son’s CAT liability when myself and my wife pass, particularly because he is an only child .
I wonder would it make more sense to take out a Section 72 policy to (perhaps partially) cover any future CAT bill?
Why so? A link would be helpful.The last time this was discussed on AAM, it appeared the opposite of a good idea.
You can presumably look it up as easily as I can. Basically, it was mentioned that a Section 72 policy is expensive and if it lapses all premiums paid in even of over a long time is totally lost. It was considered better to invest a similar sum in a savings or other policy and cash this in when the CAT liability materialises.Why so? A link would be helpful.
Is this the thread you had in mind?You can presumably look it up as easily as I can.
By that logic nobody should ever take out life assurance! You are not seriously advocating that, are you?Generally, insurance against an event that is ultimately certain to happen will always be an expensive proposition.
That's OK.I certainly wouldn’t conclude that taking out a Section 72 policy was “the opposite of a good idea” in every circumstance having read that thread. Far from it.
Hardly. Aren't most life assurance policies either fixed term or alternatively lapse on a particular event, eg the repayment of a loan?By that logic nobody should ever take out life assurance!
What sort of question is that?You are not seriously advocating that, are you?
Grand.That's OK.
The OP is just worried about an extreme emergency situation where the proverbial hits the fan and the only option is the child’s money. What’s risky about that? On that basis nobody would ever give their kids anythingGrand.
I’m not saying a section 72 policy is necessarily the right option for the OP but given his age, the age of his only child and the size of the expected estate, I think it’s certainly worth considering.
Relying on a trustee to loan me trust assets if I run into difficulties? Nah, too risky.
Sorry , just seeing you post now. Really appreciate your response. I was briefly looking into Section 72 policies recently. I must look into what the premium would be . I am aware that they are horrifically expensive. I would be concerned that either my wife or son, would fail to keep up the payments after I die and I believe if you miss one payment, the policy cancels and you have lost everything that you put into it.Have you looked at this?
Also how much of the net worth is related to property inflation? I always think of this as free money...we did nothing to earn the increase in our house value (unless major work went into it). And we get that tax free if we sell. So in reality your house worth less what you paid for it was wealth earned tax free. So your child pays tax if they inherit this untaxed wealth.
I would consider also how your wealth is bundled for inheritance in your later years. If it is all in one property, it will probably have to be sold to pay the tax. But if it is in several different assets, it could be partially sold eg shares, two properties etc. Might help guide some decisions as you age.
And you can also support their education and living expenses in full time education to 25, their wedding etc without them incurring gift tax.
Ha, and your actual experience has led you outline a scenario that is not related to the OPYou have no experience or understanding of these issues
This is not the situation outlined by the OP. But for the sake of it, revenue would have no interest in your scenario because it would fall under the lifetime CAT threshold so it's not a problem. There is no tax evasion going on. However it would take some ethically dubious decision making from the trustees to contrive a situation that no other alternative was available than to raid the fund.- Parent gifts €100,000
Absolutely, hopefully you'll catch the bus tomorrowEvery day’s a school day…
Wow.Ha, and your actual experience has led you outline a scenario that is not related to the OP
This is not the situation outlined by the OP. But for the sake of it, revenue would have no interest in your scenario because it would fall under the lifetime CAT threshold so it's not a problem. There is no tax evasion going on. However it would take some ethically dubious decision making from the trustees to contrive a situation that no other alternative was available than to raid the fund.
Going back to the OPs proposal of contributing €6k/yr to take advantage of the small gift exemption. If after 10 years, the OP tried to borrow €60k from the child as in your scenario, it would scream of a convoluted scheme to evade CAT on the eventual inheritance.
Absolutely, hopefully you'll catch the bus tomorrow
Listen to yourself.Going back to the OPs proposal of contributing €6k/yr to take advantage of the small gift exemption. If after 10 years, the OP tried to borrow €60k from the child as in your scenario, it would scream of a convoluted scheme to evade CAT on the eventual inheritance.
Even if the trust did loan the money, you would have to look at the mechanics of it. If they just use a bank account, it would be simple enough. If they use a life company, which a lot of people do, they would have to cash in the policy, which will also trigger a tax liability for the trust.Not sure people here understand the suggestion I made or how trusts work. The logic of having a third party trustee would be to opine on an extreme emergency situation where the OP needs money. So let’s think about what would face that trustee. A request for a loan to help fund accomodation and food etc for the family which includes the beneficiary. What would a reasonable person do? What would the child do if they were an adult? They’d lend the money. Revenue would have no issue with such a scenario BECAUSE of the presence of the third party trustee.
I must look into what the premium would be
That looks like reasonable value to me for that level of cover.The €6,000 would buy you circa €500,000 liability cover on a Section 72
The life company trusts are products with a bare trust layered on. ThatEven if the trust did loan the money, you would have to look at the mechanics of it. If they just use a bank account, it would be simple enough. If they use a life company, which a lot of people do, they would have to cash in the policy, which will also trigger a tax liability for the trust.
All of this adds another level of hassle and complexity to something that is pretty standard. If you are thinking of these situations now, don't do the trust until you are comfortable you have the resources to give €6,000 a year to your child...or give them less each year.
Those are life company products with a trust over it, so a small subset of the world of trusts.Even if the trust did loan the money, you would have to look at the mechanics of it. If they just use a bank account, it would be simple enough. If they use a life company, which a lot of people do, they would have to cash in the policy, which will also trigger a tax liability for the trust.
All of this adds another level of hassle and complexity to something that is pretty standard. If you are thinking of these situations now, don't do the trust until you are comfortable you have the resources to give €6,000 a year to your child...or give them less each year.
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