Making a gift of money to your grand children

We are a married couple in our mid 60’s and are currently in the processing of updating our Will which we first made 10 years ago. Since we first drafted the Will inheritance tax thresholds have fallen and also our family has grown as we now have 2 grandchildren. We would like to start some form of a college savings policy for our grandkids in order to ensure there are sufficient funds in place in 10-15 years for them to attend college, but we don’t wish for them to incur a tax liability as a result of this. Can you please give us some guidance?

 As of May 2014, the limit is €30,150 lifetime limit for all gifts / inheritances received from a grandparent. The rate of tax is currently 33%. However using the annual gift exemption could help you.

The annual exemption means that up to €3,000 a year can be received by anyone (e.g. child, grandchild, godchild, nephew etc) as a gift without giving rise to a charge to Gift Tax and without impacting on the €30,150 lifetime limit as mentioned above.

It should also be noted that his exempted amount can be received each year from any number of individuals. So a grandson could receive €3,000 a year from his grandfather, and another €3,000 from his grandmother, without incurring a gift tax liability. Those wanting to build up a fund for a loved one can also use this annual exemption to help reduce potential future gift tax.   How Does It Work ?

Instead of building up a fund in your own name to gift to the beneficiary at a later date, a regular savings policy can be effected now and then assigned into the name of the beneficiary shortly after the savings policy is issued. This way the payments into the policy are deemed a gift in the year they are paid, rather than the accumulated proceeds of the policy being deemed a gift in the year they are gifted to the beneficiary.

So based on your circumstances as outlined in your question both you and your husband could gift €3,000 per annum each to each of your two grandchildren which is a total of €6,000 to each grandchild per annum for 10 years. Over a 10 year period this equals €60,000 to each grandchild whilst still retaining the option of leaving them another €30,150 from your estate on death without giving rise to any gift or inheritance tax.

As always this information is intended as a guide but my recommendation would certainly be to explore the €3,000 annual exemption as a starting point in your desire to help your grandkids.