CAT from child to parents

P

Pinoy adventure

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Hi

Is there any tax liability if a child gifts there parents €30,000 ?

Mom and dad are purchasing a property and there child wants too help out by gifting them €30,000 towards the purchase price of the property.

Is either side liable for tax in this transaction ?

Thanks
 
Given that the money might come back some day through inheritance, it might make sense to do this as a loan so there is no inheritance due on it then? Or potentially take an interest in the property as the portion you own will have increased further in value come inheritance time, so it might be €60 or €90k you avoid inheritance tax on.
 
Zenith63 said:
Given that the money might come back some day through inheritance, it might make sense to do this as a loan so there is no inheritance due on it then? Or potentially take an interest in the property as the portion you own will have increased further in value come inheritance time, so it might be €60 or €90k you avoid inheritance tax on.
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That kinda sounds messy tbh
 
The share in the property is messy.

The loan is very straightforward.

When the parents die, instead of leaving the child €430k , they would repay the loan of €30k and leave the child €400k.

It could potentially save €10k in CAT.

Brendan
 
Pinoy adventure said:
Brilliant thanks.
So €32,500 is the life time limit for group B ?
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Yes.

Gift and Inheritance Tax (Capital Acquisitions Tax – CAT)

This page gives a general overview on CAT implications on gifts and inheritence.
www.revenue.ie www.revenue.ie
CAT is a tax on gifts and inheritances. You may receive gifts and inheritances up to a set value over your lifetime before having to pay CAT. Once due, it is charged at the current rate of 33% (valid from 6 December 2012). For more information on previous rates see CAT Thresholds, Rates and Rules.
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Brendan Burgess said:
The share in the property is messy.

The loan is very straightforward.

When the parents die, instead of leaving the child €430k , they would repay the loan of €30k and leave the child €400k.

It could potentially save €10k in CAT.

Brendan
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Brendan,

Sorry for a complete newbie question, any guidance on how one would go about setting it up?? Is it simply a letter that child and parent just draft and sign.

Something along the line of John will be borrowing xxx amount of money to Mary and Joseph and set the criteria that the repayment is to come from their estate upon their death?

And how would the Revenue recognise such loan from paper trail side?
 
I wouldn't worry too much about Revenue. Believe it or not, they don't chase after things like this between parents and children.

The most important thing is another sibling saying it was a gift and not a loan.

So just do a simple one pager - This is a loan from John to Mary and Pat. If it is not repaid before their death, it is to be repaid from their estate. There is no interest payable.

And all three sign it.

Brendan
 
Big pineapple/Brendan

One of the questions for a mortgage from banks are is there any outstanding loans.
If this loan shows up surely the banks would look unfavourably towards the borrowers ?

Or would it simply not show up before drawdown ??
 
Brendan Burgess said:
There is no interest payable.
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Interest free loan​

If you receive an interest free loan, this is a benefit and you may have to pay tax on it. The relevant tax date for this benefit is 31 December each year until the loan is paid off. The value of the benefit is the rate of return the funds would generate if they were invested on deposit.
Link: Revenue

In the context of €30k loan and current deposit rates, the above shouldn't be an issue as it would be covered by the annual €3k small gift exemption.

If the parents do not require the €30k repaid, one could also utilise the €3k exemption to reduce the balance on the loan each year. This will protect the beneficiaries CAT group A threshold.
 
Scoobydoobydoo said:

Interest free loan​

If you receive an interest free loan, this is a benefit and you may have to pay tax on it. The relevant tax date for this benefit is 31 December each year until the loan is paid off. The value of the benefit is the rate of return the funds would generate if they were invested on deposit.
Link: Revenue
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I thought that Revenue didn't bother treating personal/intra-familial loans in this way?
 
Just a little update here.
Parents want too purchase property in February-April 2023.

Should they transfer the money now or wait till the property transaction is being done too transfer the money over too parents ??

Thanks
 
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