How can you give cash away tax free?
You might think, no problem, there is nothing stopping me.
And there isn’t.
But the person receiving the gift has to pay 1/3 of the gift as Capital Acquisitions Tax (CAT).
If you have often wondered how you can pass on some cash tax free to your children or others, then there is a way.
As you may know from previous news items, CAT is charged on any gift or inheritance to your children in excess of €335,000 at a rate of 33%.
One simple way of avoiding this CAT is to use the CAT small gift allowance which allows a €3,000 gift to be made CAT free from each donor.
Margot & John open a bank account for their daughter when she is born.
The 4 grandparents and the 2 parents lodge €18k per annum (€3,000 x 6) to the account.
€378k will be accumulated in the account CAT free by the time the child is 21.
The child still has €335k of a CAT threshold from her parents.
The CAT saving is €378k @ 33% = €125k. That’s a lot of cash that you wouldn’t have to pay to Revenue!