FAQ A step by step guide to giving €3,000 a year to a child via a bare trust

[Brendan Burgess]

If the grandparents kept the 40k and invested it properly themselves all things being equal it would double every 10 years (rule of 72) so now they have €160k in their estate and, as you say they can pass on €40k tax free to tiny Tim but the excess would be taxed at 33% an extra €39k in CAT payable compared to making the gift earlier.

@Marc

You are making an 18 year plan which might well work out. But a lot could go wrong as well.

Especially if the 18 year old gets their hands on €1m.

Or maybe the Family Partnership can stop him getting his hands on the €1m until it's ready to hand it over? I can see all sorts of family disputes arising with 5 people involved now.

If the grandparents leave the money after them, the capital gains will disappear which will offset some of the extra CAT payable.

I would really need to see a case study with reasonable assumptions and full ongoing tax and professional expenses factored into it.

As Tommy said:

I'm definitely not getting into the weeds on this one except to note that throughout my career whenever I have seen people build longterm plans on the back of complex and/or expensive contracts, agreements or structures, more often than not these go awry because circumstances change, priorities change and/or the people running them neglect them.

 

[Marc]

When does the partnership make economic sense?

Cost-benefit breakeven depends on investment size and the value of extra control:


1. Portfolio value < €300 k and parents are comfortable with children gaining outright ownership at 18 → **bare trusts usually win**; the cost saving outweighs the incremental flexibility.


2. Portfolio value €300 k – €1 m → **depends on objectives**.

• If parents want to keep control until (say) age 25, the partnership cost may be justified.

• If control is less critical, stick with bare trusts.


3. Portfolio value > €1 m or where long-term multigenerational planning/estate-freeze is key → **family partnership is normally superior**. The ability to shift 90 % of future growth out of the parents’ estates and manage distributions strategically can save well in excess of the professional fees.


Practical recommendations


• Decide first whether control past age 18 and the ability to lend/re-draw capital are mission-critical.


• If you favour bare trusts, keep each child’s account small enough that turning 18 with full access will not jeopardise family goals; consider moving to a partnership structure later if the fund snowballs.

• Whichever route you choose, continue to monitor CAT thresholds.

Bottom line:

A family partnership delivers significantly greater control, estate-freeze capability and administrative consolidation, but at a higher cost than running bare trusts.

For modest pots it is hard to justify purely on cost; for large or fast-growing wealth, and/or where parental control beyond age 18 is essential, the extra spend is often worth it.

Remember if you have 4 children with €100,000 in each child’s name, that’s a €400,000 partnership.