One of the most common questions I get from parents and grandparents is:
“What’s the best way to put money aside for my children without creating a tax problem later?”
It’s a great question.
Most people know that Ireland has Capital Acquisitions Tax (CAT), often referred to as inheritance or gift tax. What many don’t realise is that there is a simple relief that allows you to gradually transfer wealth to your children completely tax-free.
Used correctly, it can help fund:
- Third-level education
- A house deposit
- A wedding
- A financial safety net
- A head start in life
And the best part?
You don’t need to wait until you’re gone to do it.
The Small Gift Exemption Ireland
Under current Irish tax rules, every individual can gift up to €3,000 per year to another person without affecting their CAT thresholds.
This is known as the Small Gift Exemption.
The exemption applies:
- Per donor
- Per recipient
- Per calendar year
This means a married couple could gift:
- €3,000 from Mum
- €3,000 from Dad
To the same child every year.
That’s €6,000 per year tax-free.
Over 18 years, that’s:
€108,000 transferred completely outside of the CAT system before any investment growth is taken into account.
How To Avoid CAT For Children
Many people search for ways to avoid CAT for children.
The reality is that there is no magic loophole.
However, there are legitimate planning opportunities available.
The Small Gift Exemption is one of the simplest and most effective because:
- It is specifically provided for in tax legislation
- It requires no complex structures
- It reduces the future value of your estate
- It gradually transfers wealth to the next generation
For families who start early, the impact can be significant.
Why Most Families Miss This Opportunity
Many parents intend to help their children financially but never put a plan in place.
The typical approach is:
“We’ll leave them something in our Will.”
While that may ultimately happen, it misses one major advantage:
Time.
A child who receives money at age 25 has missed decades of potential investment growth compared to a child who begins building wealth from birth.
Starting early allows compound growth to do much of the heavy lifting.
Savings For Children Ireland: A Better Approach
Many parents simply open a bank account and transfer money into it every month.
While this feels safe, cash savings often struggle to keep pace with inflation over long periods.
For goals that are 10, 15 or 20 years away, many families choose to invest rather than simply save.
This is where a Bare Trust can become useful.
What Is A Bare Trust?
A Bare Trust is one of the most common structures used for children’s investments in Ireland.
The child is the beneficial owner of the assets.
The trustees manage the investment until the child reaches adulthood.
Bare Trusts are frequently used for:
- Children’s education funds
- House deposit savings
- Long-term family wealth planning
- Investing annual Small Gift Exemption contributions
In simple terms, it allows money to be invested for a child while an adult remains responsible for managing it.
Bare Trust Ireland Example
Let’s assume parents invest:
€250 per month
For 18 years.
Assuming a growth rate of 5% per annum, the fund could grow to approximately:
€85,000
By age 18.
Increase the contribution to €500 per month and the figures become substantially larger.
This demonstrates why starting early often matters more than trying to contribute large amounts later.
Important: Bare Trust Registration
Since the introduction of anti-money laundering legislation, most Bare Trusts must be registered with Revenue’s Central Register of Beneficial Ownership of Trusts (CRBOT).
Many families are unaware of this requirement until after the trust has been established.
To help with this process, I’ve created a step-by-step guide showing how to register a Bare Trust with Revenue’s CRBOT system. The guide walks through the Revenue MyAccount process and explains the information required at each stage.
Some families choose to complete the registration themselves, while others prefer professional assistance.
My Take
I like this strategy because it combines three powerful concepts:
- Tax efficiency
- Long-term investing
- Helping family while you’re still around to see the benefit
Too often, inheritance planning is viewed as something that happens after death.
The Small Gift Exemption allows families to start that process today.
The Bottom Line
If you’re wondering:
- How much can I gift my child tax-free in Ireland?
- What is the Small Gift Exemption?
- How can I save for my child’s future?
- Should I use a Bare Trust?
Then it’s worth getting advice before putting a plan in place.
A relatively small amount invested consistently over time can make a meaningful difference to a child’s future.
And thanks to the Small Gift Exemption, it can often be done in a highly tax-efficient manner.
