Bare Trust: Going beyond the Small Gift Tax


In this world of rising prices every option to save counts, especially when it comes to tax. Options to save tax are slowly but surely being cut off.

Recently though on the radio and TV there has been information on employers being able to give their employees up to two small benefits, tax free, each year. These benefits, available since the 2022 Budget, must not be in cash and the combined value of the two benefits cannot exceed €1,000. The reasons for the promotion is, perhaps, two-fold; some employers are not aware the option is available and the producers of the ad want you to use their service to give the employees the tax-free benefit.

This got me thinking about another little known way for people to give their children/grandchildren a financial boost without triggering a tax liability. The facility is called  the Small Gift Tax which could and will make a significant difference for families.

Picture this: You want to give your child or grandchild a financial gift to help them start their journey in life, be it for education, their first car, or simply a nest egg for the future. With the Small Gift Tax Exemption you can gift up to €3,000 annually without worrying about tax implications. This means your gift won’t eat into their tax-free threshold for Capital Acquisition Tax purposes. You set it up for them without any tax implications.

But what if you want to go beyond the annual €3,000 limit? Then  the Bare Trust comes to the rescue. This ingenious financial tool allows parents, grandparents, or other relatives to contribute up to €3,000 for each calendar year for each child in a tax-efficient manner.

Take, for instance, a situation where two parents invest €6,000 annually into a Children’s Savings Investment Trust for their child. Not only does this avoid gift tax, but it also leaves the child’s lifetime inheritance allowance untouched, ensuring a transfer of wealth without a tax liability.

As with any financial arrangement, understanding the ins and outs of Bare Trusts is crucial. Who manages the trust? Can trustees be beneficiaries? What happens when beneficiaries come of age? These are just a few of the questions that need answering. Trustees oversee the management and control of funds until they are released to beneficiaries at a future date. And while certain aspects, like the inability to revoke the trust once established, may seem daunting, the benefits far outweigh the limitations.

So maybe now’s the time to take action. Whether you’re a parent looking to set up a trust for your child’s future or a grandparent wanting  to provide a lump-sum, exploring these tax-efficient options could pave the way for a brighter tomorrow.

Remember though, navigating the intricacies of wealth management requires careful consideration and expert advice. So, why wait? Give us a call  today to unlock the full potential of your assets and help secure your children’s/grandchildren’s future.

T: 086 8362622


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