A comprehensive guide to Small Gift Exemption Savings Plans in Ireland, explaining their benefits, types for both under and over 18s, and how they enable parents, grandparents, and relatives to gift significant sums to children and beneficiaries without incurring Capital Acquisitions Tax or eroding lifetime exemptions. Outlines provider options, investment choices, and presents real-life scenarios for using these savings plans as effective estate planning and wealth transfer tools.
Gift/Inhertance Tax Savings Plans
Benefits Summary
- These savings plans enable each parent, grandparent, uncle, or aunt to transfer the annual gift exemption of up to €3,000 to a child or beneficiary without triggering any gift or inheritance tax liability (CAT) either now or in the future.
- The gift does not affect or reduce the beneficiary’s lifetime gift or inheritance tax exemption limits.
- Contributions to the savings plan can be made monthly or annually to each policy.
- Contributions can be made to this plan for as long as the payer (parent/grandparent/aunt/uncle) wishes.
- Contributions can be paused/ceased at any time; however, all contributions are owned by the child/beneficiary and can’t be reversed.
- The contributions to the savings plan are invested and can benefit from compounded returns over time.
- All future investment returns are also exempt from any CAT liability.
- They are available to under 18 and over 18-year-olds — however their entitlements are slightly different.
2 Variations of Small Gift Exemption Savings Plans
There are two types of these savings plans, each with its own setup requirements.
For under 18s (Bare Trusts):
- These are also often called Bare Trusts.
- The payer (usually parent/grandparent, etc.) contributes to the plan on behalf of the beneficiary (child).
- There can be multiple payers to this plan; however, each payer has a limit of €3,000 annually that they can contribute under revenue rules.
- There must be only one beneficiary (child) per savings plan.
- The beneficiary cannot access the funds until they are over 18.
- A trustee is appointed (usually the payer or the parent of the child) who manages the plan until the child is over 18 (chooses the investment, etc.).
- Each application requires a signature from each payor and AML documentation (Proof of ID, address, PPS).
- No signature is required for the child — only their passport and PPS proof.
For over 18s:
- With these plans, the beneficiary controls the funds from day one (no trustee required).
- Payers contribute on the beneficiary’s behalf.
- Multiple payers allowed, but only one beneficiary per plan.
- Application requires signatures from both the beneficiary and the payer(s), plus AML documentation.
- Beneficiary chooses investments.
- Beneficiary may withdraw funds at any time without the payer’s consent.
Who Are These Plans Most Suitable For?
- Parents/grandparents wishing to gift cash assets to their children.
- Godparents/uncles/aunts setting up plans for nieces, nephews, or godchildren.
- Relatives creating a savings plan for a child whose parents are deceased.
- High net worth individuals who wish to gradually pass on cash assets during their lifetime without affecting CAT thresholds.
Who Provides These Plans?
Offered by most insurance providers in Ireland:
- Irish Life
- Zurich
- Aviva
- New Ireland
- Standard Life
Comparison factors include:
You might also like our post on How Small Gift Exemption Savings Plans Can Minimise Inheritance Tax For Children And Grandchildren.
- Fees & charges
- Allocation rate
- Set-up fees
- Annual management charges
- Customer service reputation
- Investment choice and fund performance
Where Are Funds Invested?
Contributions are invested with the chosen insurance provider, with options across low, medium, and high-risk funds.
Related read: How To Use A Section 73 Savings Plan In Ireland To Avoid Inheritance Tax.
Case Scenarios
Example 1 – Grandparents Gifting
Tom and Louise, new grandparents of Oisín, set up a Small Gift Exemption savings plan for him. Both can gift €3,000 annually tax-free. This does not reduce his €40,000 lifetime CAT exemption. They contribute €500/month (€6,000 annually) into a balanced multi-asset fund (7% average return). By Oisín’s 18th birthday, the fund could reach €160,000 — all CAT-free.
Interested in gift tax savings for your family? Enquire now and learn how these plans can benefit your loved ones.
Recommended: Building A Strong College Fund: Comparing Tax Efficient Education Savings Plans And Investment Options For Children In Ireland.
Example 2 – High Net Worth Individual
John, a business owner worth €3m, faces a potential €600,000 CAT bill for his children. To avoid forcing a sale of family assets, he gifts €39,000 annually to his 3 sons and 10 grandchildren. Over 10 years, he transfers €390,000 tax-free, with all compounded returns also exempt.
Ready to take control of your estate? Book a consultation now and receive personalised financial planning advice.
You might also like our post on College Education Savings Plan In Ireland: The 2025 Parent’S Guide To Smart Education Planning.
Frequently Asked Questions
What is Estate Planning?
Preparing for the management and distribution of assets after death/incapacity (includes wills, trusts, and minimising tax).
Related read: Inheritance Tax Ireland – How To Reduce Your Tax Burden.
What is Capital Acquisitions Tax (CAT)?
A tax on gifts and inheritances above threshold limits.
Curious about inheritance tax strategies? Reach out today to discover how to maximise your estate’s value.
Current CAT Thresholds (from 2 Oct 2024):
- Group A (children): €400,000
- Group B (other relatives): €40,000
- Group C (others): €20,000
What is the Annual Gift Exemption?
Each individual can gift €3,000 annually per beneficiary, tax-free.
Want to explore tax-effective gifting options? Schedule your consultation today to discuss tailored strategies.
What Tax is Payable on Returns?
Exit tax of 40% applies on returns.Automatically deducted after 8 years by insurance providers if policy not encashed.
What is a Bare Trust?
A trust where settlors transfer money for a child, managed by trustees until the child reaches 18.
CONCLUSION
By leveraging Gift/Inhertance tax savings plans, you can transform your approach to estate planning. These plans enable you to gradually pass on wealth during your lifetime, potentially saving your beneficiaries significant inheritance tax down the road. Careful selection of contributions, understanding tax-free allowances, and strategic planning are key to maximising the benefits for both you and your loved ones.
As you consider your estate planning strategy, remember that informed decisions can lead to substantial financial advantages. By understanding the nuances of Gift/Inhertance Tax Savings Plans and how they fit into your overall financial picture, you pave the way for a more secure and prosperous future. Whether you’re starting small or making substantial contributions, every step towards effective planning contributes to long-term savings and peace of mind.
To truly capitalise on these opportunities, it’s essential to seek professional advice tailored to your unique circumstances. Let Money Maximising Advisors guide you through the intricacies of estate planning, ensuring you make the most of your financial legacy. Take the first step towards securing your family’s future today.
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