Using Annual €3,000 Small Gift Exemption

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Pat77

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I am interested in understanding how to utilise the €3,000 Small Gift Exemption to build up a savings plan for a child.

I am looking at opening a Quinn-Life Fund in my and my wifes names for the benefit of our child and plan to pay in €6,000 (€3,000 from each of my wife and I) each year.

What would the Revenue require in terms of documentation or returns to ensure that the transfer can avail of the Small Gift Exemption?
 
Pat77 said:
I am interested in understanding how to utilise the €3,000 Small Gift Exemption to build up a savings plan for a child.

I am looking at opening a Quinn-Life Fund in my and my wifes names for the benefit of our child and plan to pay in €6,000 (€3,000 from each of my wife and I) each year.

What would the Revenue require in terms of documentation or returns to ensure that the transfer can avail of the Small Gift Exemption?
Click to expand...

Why Quinn Life? Faith in the past or faith in the future?
 
Pat77 said:
I am looking at opening a Quinn-Life Fund in my and my wifes names for the benefit of our child and plan to pay in €6,000 (€3,000 from each of my wife and I) each year.
Click to expand...

Wonder if this is considered a gift if the plan is retained in the donors names ?
 
Please allow me to explore this for a bit.....

If you gift €3,000 to a minor can that minor then pass on that gift to others?

To illustrate....
i.e. if I wanted to help out my sister who is (for illustrative purposes) a struggling single mother I can gift her €3,000 and I presume I can gift my niece another €3,000. No issues so far?

Question?
Can my niece (age 2 or 3) then gift her €3,000 to her mother (my sister)? Thus my sister gets €6,000 as gifts technically from different people and she has no tax liability and no erosion of her CAT threshold?

Anyone?
 
Booh, there is an anti avoidance measure to avoid this sort of "gift splitting". In these sort of cases, where a person passes on a gift within 2 years, it will be deemed to have been made by the person who made the first gift (ie in your example, you will be deemed to have gifted your sister €6,000, not €3,000).
 
Thanks Nige, that's useful.

in general though, are there restriction on gifts being made by minors to adults?
If I gifted €3k to my niece, could she then give it to her mother in 2 yrs time?

Really we all know it's the mother simply saying can I please have your €3,000 and the child saying yes mummy, but is there anything preventing it?
 
Booh, there's no specific provisions dealing with minors making gifts, but there is the obvious issue of capacity and the Revenue will overrule artifical transactions.

If your example is a real life one, I would suggest annual gifts to your sister of €3,000 (if you can) and paying for plenty of your niece's expenses - clothes, shoes and all those expensive things children need.
 
Okay, last shot,

Could I LEND my sister €27,000 interst free over 10 years and GIFT her €3,000.
And
Can I write off €3,000 of the loan every year thereafter as an annual gift?

That way she gets benefit of €30,000 in yr 1 and at the end of 10 yrs has nothing to repay and no erosion of her CAT threshold?

Would that be considered acceptable or artificial?
 
If at the outset you are intending to write off the loan, it's not really a loan and so artificial.

In addition, an interest free loan is deemed to be a gift of the market interest rate, so (using a 9% interest rate) a €27,000 loan would eat up €2,430 of the small gift exemption each year.

However, if you had the €30,000 to spare and your sister hasn't received gifts or inheritances from grandparents, siblings, uncles or aunts before, you could just give her this amount. She has a €45k (roughly) life time exemption from this class of relatives.

Another thing you could do (but it would cost more for now) is let her live rent free in a property you own. The deemed annual gift would be the market rents for such a property which would be likely to be much less than the mortgage payments on such a property. You'd be saving her a lot of money, giving her security of tenure and you'd have an asset at the end of it.
 
Firstly Pat77, I apologise for hijacking your thread. I'm happy to start a new one but we're just about done here I think.

Secondly, Cheers Nige, appreciate your responses.

Final question for you Nige as you seem to understand this area very well.
If you repay a gift over time does it cancel the gift out?

i.e. if I gave her €30,000 as a gift and if she came in to money in a few years and repaid the gift, can she act like it never happened?

I understand that she wouldn't need to declare the gift in the first place if it is under 80% of her CAT threshold (I read that on Revenue.ie) assuming she has recieved no other gifts or inheritances in that CAT thhreshold to date.

Would her CAT threshold be intact in such a circumstance, if she repaid the gift in total over time?
 
A gift is an unrevocable giving of something. It cannot be repaid later.

So, you'd be better off to lend the money to your sister (draw up an interest free loan agreement with repayment on demand with maybe 12 months' notice on your side or repayable by her at any time). Then, if she comes into money, she can repay it. Or you can write it off and then it becomes a gift.

Every year she'd have the "gift" of the interest saved, but that will probably be less than the annual gift exemption.

Oh, and good for you trying to help. I hope she appreciates you.
 
Yes that may be better.
I presume that if the loan is used towards the purchase of a house (which she could prove), that I could offer an attractive fixed rate of interest of 0% with repayments by her at any time.
0% fixed is currently about 4.00% less than the ECB base rate.


The gift SHOULD therefore be interest of 4.00% of €30,000 which is only €1,200 pa.
That leaves €1,800 remaining out of the €3,000 exemption which I could write off against the loan.
Therefore next year the loan's opening balance would only be €28,200 and so on. From a rough calc it would probably all be gone completely by the end of 16 years as each year the interest portion of the €3,000 gets less and less and so more and more of the capital gets paid off out for the €3,000 year on year.

Does that work?

PS
(could I use 4.00% throughout the life of the loan even if rates went up, if I make it a fixed rate of interest of 0%) After all, banks that offer fixed rates could end up offering you money at less than ECB lending rates. They aren't deemend to be gifting you the difference are they? It's your good fortune if that happens.
 
I don't think the 4% rate would work unless her property is given as security for the loan. In addition, the regular write off of the loan would suggest (if the Revenue ever looked at it) that the "loan" was actually a gift.
 
Booh,

Why not open a deposit account with a cashcard. Put in 3k per year and let your sister use the card. No revenue involvement at all.........

Seems a lot simpler & hard to see the drawbacks (at least I can't see any).
 
Thanks guys,

the €3,000 pa is not the prob, that could be given anyway as a small gift, i was looking for a clever way to give her more up front and slowly write it off each year.

The small gift exemption seemed to hold possibilities but Nige has poured cold water on that one.

I'll put my thinking cap back on.

Thanks for the input.
 
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