Family finance: How you can fund your children's future

John Lowe

IF YOU are a parent, you do not have to die to give your children some of your life savings.

There are rules, regulations, thresholds and three categories:

Group A applies where the beneficiary, the person receiving the benefit, is a child of the person giving it. This includes a stepchild or an adopted child. It can also include a foster child if the foster child resided with and was under the care of the disponer (the person who is giving the inheritance) and they provided the care at their expense for a period or periods totalling at least five years before the foster child reached the age of 18.

(This minimum period does not apply in the case of an inheritance taken at the death of the disponer.)

Group A also applies to parents who take an inheritance from their child, but only where they take full and complete ownership of the inheritance. If a parent does not have full and complete ownership of the inheritance, or if a parent receives a gift, then Group B applies.

If a parent inherits from their child, and has full and complete ownership of the inheritance it is exempt from tax if, in the previous five years, the child took an inheritance or gift from either parent and it was not exempt from Capital Acquisitions Tax. In this case, no tax needs to be paid.

Group A may apply to a nephew or niece if he or she has worked in the business of the person giving the benefit for the previous five years and meets the following criteria: The nephew or niece must be a blood relation; the gift or inheritance consists of property used in connection with the business, including farming, or of shares in the company.

If the gift or inheritance consists of property then the nephew or niece must work more than 24 hours a week for the disponer at a place where the business is carried on, or for the company if the gift or inheritance is shares. But if the business is carried on exclusively by the disponer, their spouse and the nephew or niece, then the requirement is that the nephew or niece work more than 15 hours a week. The relief does not apply if the benefit is taken under a discretionary trust.

Group C applies to any relationship not included in Group A or Group B. If you receive a benefit from a relation of your deceased spouse, you can be assessed with the same group as your spouse would be if they were receiving the benefit from their relation.