Son giving money to parents - any tax implications?

D

deco87

Registered User
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Hi
I'm separated. Will be divorced in three weeks or so.
In order to satisfy , my ex wife I have sold my family home.

I have given half of the full proceeds to my ex - wife.

The matter rests , there , no maintenance or outstanding issues.

For personal reasons I wish to give my half of the proceeds to my parents.

However , I am concerned that there may be tax implications for them.

Could somebody clarify if that is the case? If so , what is the most tax efficient
way to do this.

I want to do this immediately , and as uncomplicated as possible.

Thanks

D
 
Give them an interest free loan?

Without knowing the amounts involved, Capital acquisitions (inheritance) tax kicks in after 32,500 to each parent. You'd ultimately pay CAT in future on inheritance from your parents on amounts over 320k, so it could end up being taxed twice.
 
well no , I wanted to give it to them permanently. Don't want it back ....one day , hopefully not for a long time to come .I will be provided for well.
I would imagine that it would probably come under "Gift Tax" ? I don't want to have them liable as a result of this. 80K is approx. amount.
Thanks for quick reply.
 
Yes, if you gift the entire, they'd be subject to gift tax on the amount in excess of 65k (well, 71k, since the first 3k each is exempt each year)

You could gift them 71k now, and 6k in the new year. No tax - This is assuming your parents haven't received a gift / inheritance from a 'Group B' source previously.
 
RedOnion said:
Yes, if you gift the entire, they'd be subject to gift tax on the amount in excess of 65k (well, 71k, since the first 3k each is exempt each year)

You could gift them 71k now, and 6k in the new year. No tax - This is assuming your parents haven't received a gift / inheritance from a 'Group B' source previously.
Click to expand...
So he can gift 6K this year. Gift 74K in January. And 6K of that is exempt. Leaving 68K. How much tax would there be on that. Not sure how you arrived at 71K?

But he could gift 6K this year, 6K next year. Loan 68K. Annually the parents pay him back 6K and he then gifts them 6K for about 11 years.
 
HI All

Many thanks for your quick reply.

Could I just make one further inquiry/scenario , so as I am clear ? Thanks.

Since the inception of this act (1991?) if , as is the general way , My parents received , a gift / Inheritance , when their parents passed away
, if we use this as an example , for the purpose of my understanding the ramifications of this , say , my father received 100K and my mother 25k.

(paste from " Red Onion" above - " Capital acquisitions (inheritance) tax kicks in after 32,500 to each parent. You'd ultimately pay CAT in future on inheritance from your parents on amounts over 320k, so it could end up being taxed twice")

In this scenario , if I follow , My father has used his full exemption under the act. If I gave his 40K (half) this month I can utilize the 3k to me and 3k to his grandchild who lives with me, in this calendar year 2018 , give him 6K before year end and 6k again under small gifts in January (2019)
then the balance after that (80k - 12k = 68K) , 68k would bring a tax liability of 32% (Gift tax rate?) 24.000 euro , would have to be paid by parents to revenue , is that correct?

As regards my mother , (25k) this figure would be that would 7.500 short of the 32.000 mentioned above , in this instance , giving 40 k
can use the small gifts , exemption as like my father , so 12k (2018/2019) and discount the 7.500 ... adding these two figures comes to
19.500 ....so 40k im giving - the 19.500 = 20.500 liable at gift tax rate (32%) meaning tax to revenue in this case of 6.500 (one third or so)


These calculations are rough , just trying to see basically if I gave my parents 80k . i.e. 40 k each , if I have this right this would mean a bill of
30.500 ? seems very harsh , is there a tax efficient way of doing this better (Appreciate needs an accountants eye)

All I am seeking here is pointers , no more , its quite complicated I know.
 
deco87 said:
My parents received , a gift / Inheritance , when their parents passed away
Click to expand...
That wouldn't impact.
From parent to child is 'Group A' threshold.
From child to parents to 'Group B'.
It's a completely separate threshold.

However, siblings, grandparents and aunts/uncles are also in Group B.

From a tax efficient perspective, the loan idea is worth considering. Just give them the money, and get them to sign a piece of paper saying it's an interest free loan not payable for 50 years.
 
ok thanks , so provided that , if any inheritance /Gift , was a GROUP A , ONLY , relating to my folks , The full exemption would apply i.e. 32.500
for each , and with the small gift exemption added , there would be very little if any , interest due to revenue , by my giving both my mother and father 40k each using the exemptions under the act?

Thanks again ,

Red Onion , could you expand a little on the Loan not payable for 50 years suggestion , that's sounds that ideal way to go , perhaps , depending on the criteria. (Would you be able to send me a "link" to that?

Again thanks for all the advice.

I appreciate it.
D
 
Either lend it to them so you can effectively inherit it back when they die.

Or gift €32,500 to each right now plus €3,000 to each this side of 31 December and €3,000 to each in January. That’s €77,000.

And if you have decent income and they have very little income, look at covenanting money to them.
 
Hello
You could gift 3k to each parent now ..

Then in jan 19 You could lend each parent the remaining money .. you could then annually write of part of the loan to maximise the small gift exemption..

But note a interest free loan is a gift too..

Eg, 40k to each parent. Say interest rate on loan 2% on the o/s loan balance;

Year 1
Gift- 800 notional interest
Gift- Write off 2,200
Closing loan balance 37,800

Year 2
Gift- 756 (2% on 37,800)
Gift- write off 2,244
Closing loan balance €35,556

Year 3
Gift- 711 (2% on 35,556)
Gift- write off 2,289
Closing loan balance €33,267

You get the idea..

You could then write off the loan once you were below their threshold b levels..
 
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