Removing funds from minor's investment account

_OkGo_ said:
Taking money from a child is not a "playbook". Dress it up however you want put it would be completely bogus
Click to expand...
You have no experience or understanding of these issues. The proposal is perfectly fine.

- Parent gifts €100,000
- Third party bare trustee appointed
- Unforeseen emergency arises
- Parent asks trustee for a loan
- Trustee considers what a reasonable person would do when such an emergency would clearly affect the child/beneficary and what the child would be likely to do if he or she was an adult
- Trustee advances the loan

There is nothing wrong with the above and Revenue would have no issue with it. The only risk is a negligible legal one of the adult child having a cut at the trustee, which is mitigated, as the trustee documents the decision and rationale, the loan is surely repaid in this case, and the child is hardly going to jeopardise future inheritances by acting the maggot.

Every day’s a school day…
 
Last edited:
You could try just "earmarking" the money for him but keeping it yourself.

Revenue rules that annual small gift exemption must be actually given and not just "earmarked".

Interesting article in the independent; (https://www.independent.ie/irish-news/man-32-who-received-almost-500k-from-parents-fails-in-tax-battle-with-revenue-despite-communion-money-claims/a845644263.html) I would tend to agree with the ruling here that the small gifts from parents was...
www.askaboutmoney.com

Just in case... I am only joking.
 
Loki1974 said:
I am concerned about our son’s CAT liability when myself and my wife pass, particularly because he is an only child .
Click to expand...
I wonder would it make more sense to take out a Section 72 policy to (perhaps partially) cover any future CAT bill?
www.irishtimes.com

Insurance can pay inheritance tax bills... at a price

Q&A: Dominic Coyle answers your personal finance questions
www.irishtimes.com www.irishtimes.com

If you subsequently ran into financial difficulties, you just stop paying the premiums.
 
Sarenco said:
Why so? A link would be helpful.
Click to expand...
You can presumably look it up as easily as I can. Basically, it was mentioned that a Section 72 policy is expensive and if it lapses all premiums paid in even of over a long time is totally lost. It was considered better to invest a similar sum in a savings or other policy and cash this in when the CAT liability materialises.

Generally, insurance against an event that is ultimately certain to happen will always be an expensive proposition.
 
T McGibney said:
You can presumably look it up as easily as I can.
Click to expand...
Is this the thread you had in mind?

Is a Section 72 policy good value?

This was raised in another thread . I have never seen an example of how it works in practice. Let's say I am 65 and am worth €1m which I want to leave to one daughter. I am in good health. I take out insurance for the CAT bill. The CAT bill if I were to die today would be about €220k (€1m...
www.askaboutmoney.com

I certainly wouldn’t conclude that taking out a Section 72 policy was “the opposite of a good idea” in every circumstance having read that thread. Far from it.
T McGibney said:
Generally, insurance against an event that is ultimately certain to happen will always be an expensive proposition.
Click to expand...
By that logic nobody should ever take out life assurance! You are not seriously advocating that, are you?
 
Sarenco said:
I certainly wouldn’t conclude that taking out a Section 72 policy was “the opposite of a good idea” in every circumstance having read that thread. Far from it.
Click to expand...
That's OK.
Sarenco said:
By that logic nobody should ever take out life assurance!
Click to expand...
Hardly. Aren't most life assurance policies either fixed term or alternatively lapse on a particular event, eg the repayment of a loan?
Sarenco said:
You are not seriously advocating that, are you?
Click to expand...
What sort of question is that?
 
T McGibney said:
That's OK.
Click to expand...
Grand.

I’m not saying a section 72 policy is necessarily the right option for the OP but given his age, the age of his only child and the size of the expected estate, I think it’s certainly worth considering.

Relying on a trustee to loan me trust assets if I run into difficulties? Nah, too risky.
 
Sarenco said:
Grand.

I’m not saying a section 72 policy is necessarily the right option for the OP but given his age, the age of his only child and the size of the expected estate, I think it’s certainly worth considering.

Relying on a trustee to loan me trust assets if I run into difficulties? Nah, too risky.
Click to expand...
The OP is just worried about an extreme emergency situation where the proverbial hits the fan and the only option is the child’s money. What’s risky about that? On that basis nobody would ever give their kids anything :)

We’re simply talking about a mechanism that could be built into gifts to a child for a particularly nervous individual to protect their ability to borrow money from the child where there’s a black swan event. You mustn’t have read the detail! What’s less risky, never gifting anything to anyone? The suggestion decreases the risk because it gives the parent extra protection.
 
The point is that there is no way to build in a mechanism in advance to ensure that trust assets get lent back to a settlor in extreme circumstances.

That’s not legally possible - you have either settled assets on trust or you haven’t.

In any event, €6kpa is going to take a long time to build into a meaningful figure. What if the OP gets hit by a proverbial bus in the morning?
 
misemoi said:
Have you looked at this?


Also how much of the net worth is related to property inflation? I always think of this as free money...we did nothing to earn the increase in our house value (unless major work went into it). And we get that tax free if we sell. So in reality your house worth less what you paid for it was wealth earned tax free. So your child pays tax if they inherit this untaxed wealth.

I would consider also how your wealth is bundled for inheritance in your later years. If it is all in one property, it will probably have to be sold to pay the tax. But if it is in several different assets, it could be partially sold eg shares, two properties etc. Might help guide some decisions as you age.

And you can also support their education and living expenses in full time education to 25, their wedding etc without them incurring gift tax.
Click to expand...
Sorry , just seeing you post now. Really appreciate your response. I was briefly looking into Section 72 policies recently. I must look into what the premium would be . I am aware that they are horrifically expensive. I would be concerned that either my wife or son, would fail to keep up the payments after I die and I believe if you miss one payment, the policy cancels and you have lost everything that you put into it.
 
Gordon Gekko said:
You have no experience or understanding of these issues
Click to expand...
Ha, and your actual experience has led you outline a scenario that is not related to the OP

Gordon Gekko said:
- Parent gifts €100,000
Click to expand...
This is not the situation outlined by the OP. But for the sake of it, revenue would have no interest in your scenario because it would fall under the lifetime CAT threshold so it's not a problem. There is no tax evasion going on. However it would take some ethically dubious decision making from the trustees to contrive a situation that no other alternative was available than to raid the fund.

Going back to the OPs proposal of contributing €6k/yr to take advantage of the small gift exemption. If after 10 years, the OP tried to borrow €60k from the child as in your scenario, it would scream of a convoluted scheme to evade CAT on the eventual inheritance.

Gordon Gekko said:
Every day’s a school day…
Click to expand...
Absolutely, hopefully you'll catch the bus tomorrow
 
_OkGo_ said:
Ha, and your actual experience has led you outline a scenario that is not related to the OP


This is not the situation outlined by the OP. But for the sake of it, revenue would have no interest in your scenario because it would fall under the lifetime CAT threshold so it's not a problem. There is no tax evasion going on. However it would take some ethically dubious decision making from the trustees to contrive a situation that no other alternative was available than to raid the fund.

Going back to the OPs proposal of contributing €6k/yr to take advantage of the small gift exemption. If after 10 years, the OP tried to borrow €60k from the child as in your scenario, it would scream of a convoluted scheme to evade CAT on the eventual inheritance.


Absolutely, hopefully you'll catch the bus tomorrow
Click to expand...
Wow.

My example is so different in that I used a nice round number of €100,000 vs your €60,000 number. I don’t know how old the child is, I just picked 6 x €16,000 / circa €100k.

You haven’t a clue. What exactly is the issue with my suggestion? I’m sure you’re drawing on your enormous experience of trust and estate law and tax to debunk what I suggested. Or might you perhaps be a barstool expert?
 
_OkGo_ said:
Going back to the OPs proposal of contributing €6k/yr to take advantage of the small gift exemption. If after 10 years, the OP tried to borrow €60k from the child as in your scenario, it would scream of a convoluted scheme to evade CAT on the eventual inheritance.
Click to expand...
Listen to yourself.

‘ethically dubious decision’

‘convoluted scheme to evade CAT’

Are you for real? Let’s see if you have the capacity for rational thought…

What if it was an adult child who’s gifted €6k a year for 20 years? They have, say, €200k. The parents run into unforeseen financial difficulty. The adult child lends €100k to his parents.

Do you think that ‘screams of a convoluted scheme to avoid CAT’? :)

I’ll say it slowly so hopefully you understand it…the whole point…of the independent trustee…is to demonstrate…that it isn’t a scam or a ruse…if an unforeseen emergency arises…and in extreme circumstances…the parents need to borrow…from the child. The trustee considers what a reasonable person would do when the household that the child lives in is in an emergency situation and the child has money…it is perfectly logical and reasonable for the trustee to lend money to the parents.
 
Gordon Gekko said:
Not sure people here understand the suggestion I made or how trusts work. The logic of having a third party trustee would be to opine on an extreme emergency situation where the OP needs money. So let’s think about what would face that trustee. A request for a loan to help fund accomodation and food etc for the family which includes the beneficiary. What would a reasonable person do? What would the child do if they were an adult? They’d lend the money. Revenue would have no issue with such a scenario BECAUSE of the presence of the third party trustee.
Click to expand...
Even if the trust did loan the money, you would have to look at the mechanics of it. If they just use a bank account, it would be simple enough. If they use a life company, which a lot of people do, they would have to cash in the policy, which will also trigger a tax liability for the trust.

All of this adds another level of hassle and complexity to something that is pretty standard. If you are thinking of these situations now, don't do the trust until you are comfortable you have the resources to give €6,000 a year to your child...or give them less each year.
 
Steven Barrett said:
Even if the trust did loan the money, you would have to look at the mechanics of it. If they just use a bank account, it would be simple enough. If they use a life company, which a lot of people do, they would have to cash in the policy, which will also trigger a tax liability for the trust.

All of this adds another level of hassle and complexity to something that is pretty standard. If you are thinking of these situations now, don't do the trust until you are comfortable you have the resources to give €6,000 a year to your child...or give them less each year.
Click to expand...
The life company trusts are products with a bare trust layered on. That
Steven Barrett said:
Even if the trust did loan the money, you would have to look at the mechanics of it. If they just use a bank account, it would be simple enough. If they use a life company, which a lot of people do, they would have to cash in the policy, which will also trigger a tax liability for the trust.

All of this adds another level of hassle and complexity to something that is pretty standard. If you are thinking of these situations now, don't do the trust until you are comfortable you have the resources to give €6,000 a year to your child...or give them less each year.
Click to expand...
Those are life company products with a trust over it, so a small subset of the world of trusts.
 
You must log in or register to reply here.
Back
Top