Business Personal Finance

Thursday 12 December 2019

What you can't pass onto the kids tax-free

If you marry young, you could be hit with an inheritance tax bill
If you marry young, you could be hit with an inheritance tax bill
Louise McBride

Louise McBride

No matter how smitten your teenager is, it would be wise to dissuade your child from walking up the aisle before they turn 18. Otherwise, your child could be hit for inheritance tax, should you foot the bill for their college education or pay money to support them after they get married.

In the Government's plan to tighten up the tax-free exemption around payments for the support, maintenance and education of a child, only 'minor' children or children in full-time education who are no older than 25, can claim this exemption.

"Minor child means a child who has not attained the age of 18 years and is not and has not been married," said a spokeswoman for the Revenue Commissioners.

Under the upcoming Finance Bill, it will only be adult children under 25 in full-time education who can claim an exemption from inheritance tax for any money received from their parents for their support, maintenance or education.

So adult children in part-time education who are under 25 could be liable for inheritance tax. So too could a 19-year-old who is working.

Adult children (who are not under 25 and in full-time education) will no longer be able to argue that a wedding or holiday gift was a way for their parent to support or maintain them. So once that gift is over a certain value, tax bills could arise.

The same usually applies to any dig outs given to adult children in financial distress. Either way, only "normal and reasonable payments" made to children for their support, maintenance or education have ever truly qualified for the exemption. "The tightening of the rules is to protect the exemption from spurious claims," said the Revenue spokeswoman.

Children will still be able to receive money towards their support, maintenance and education tax-free if those payments don't come to more than €3,000 a year - or, together with other gifts or inheritances, don't exceed €225,000 over their lifetime.

Sunday Indo Business

Also in Business