Q. I have given €20,000 to each of my children as part of their inheritance. Do they or I have to notify the Revenue or will they be asked when I pass on? I know the limit is €225,000 for each child.
A. The simple answer is no, neither you nor your children needs to notify the Revenue. In fact, depending on how you made the transfer, it need not necessarily count against their cumulative limit of €225,000 which a child can receive from their parents before facing a liability to capital acquisitions tax (inheritance or gift tax).
The money you have passed to your children constitutes a gift in Irish tax terms, rather than an inheritance, but the distinction is a moot point as the same tax rules apply.
In Ireland, inheritance tax is levied on the recipient of the inheritance and not on the estate, and so the duty of notification, where applicable, is on them – in this case your children.
However, there is no need under Irish tax rules to notify Revenue about gifts and inheritance until the cumulative figure – totting up gifts from you and their father in this case – exceeds 80% of the relevant threshold.
As you note , the threshold for gifts and inheritances between parents and children is €225,000, so there is no obligation to inform Revenue until any of your children receives more than €180,000.
Bear in mind that the obligation to notify related to each category of CAT – between parents and children, between linear relations (where the limit is €30,150) and between other people (where the limit is €15,075).
So, if your children have not already received gifts or inheritances in excess of €160,000 from you or their father before this latest gift, they can rest easy.
Getting back to my earlier point about whether the sum would count towards the threshold at all, it is important to remember in terms of estate planning that you are entitled to give a sum of up to €3,000 to any of your children, or to each of them each year, without it being taken into account in assessing CAT liability.
This relief is called the small gift exemption and can be a handy way of drip-feeding part of your estate to the next generation at a time when it can be really useful to them in meeting mortgage, childcare, education or other costs.
As long as the gift is below €3,000 in any given year, there is no tax liability either to you or them.
There is also nothing to stop you giving a sum up to this amount to the same people – or indeed others, such as grandchildren, or even friends – year after year.
If you drip-fed that over seven years, it would amount to the same benefit to your children but would not count at all on their €225,000 threshold. Depending on the size of your estate when you eventually do pass on – and on anything they might have received from their father, this could be really useful.
If you need advise on estate planning, please contact Burns Nowlan on 045 432382 or email your queries to firstname.lastname@example.org