I wish to gift my three young kids €3,000 per year. Is it as simple as going into a bank opening up three accounts for them and then deposit €3,000 each year?
I contacted my solicitor and he didn’t know. As they are minors, would I have to open the accounts in my name? And, if so, have I technically given away the €3,000? And does it qualify for the exemption?
We have contacted a few people in the bank on this and apparently it’s not done very often and no one can advise me how to do this properly and tax compliantly.
I hate to think I went to the effort of gifting them the €3,000 for 10 years only to find at the end that I had opened up the wrong type of account and what I had given would be taken off their €335,000 threshold.
Ms A.McG., email
This always seems to cause problems and I’m never sure quite why. It’s especially concerning that people in the bank whom you have contacted neither know what to do or even who they might contact to find out.
There are rules around very young children being able to open an account in their own name but, unsurprisingly, given how keen banks are to capture business as early as possible – knowing that people tend to stick with their initial provider pretty much regardless – the banks have structures and options in place to work within the rules that apply.
The bigger issue, given the sums of money you are talking about, is whether you’d be happy having it in bank accounts to which your children will have access.
All the banks have different arrangements. Most will require you to open such accounts in person rather than online. Depending on the institution and the age of the child, the account will be opened in the child’s name or the parent’s name with the child’s name noted.
In most cases, parents will operate accounts for children under the age of seven at least (sometimes later in some banks).
You will generally need the child’s passport or birth certificate, their PPS number, photo ID for the adult supporting/managing the account, and proof of address.
For instance, AIB operates a junior saver account which can be opened by anyone over the age of seven with parental consent. It will be in the child's sole name. And this account changes with them as they grow, automatically becoming a student saver account when they reach the age of 12 and a normal demand deposit account when they turn 19.
On its website, AIB says there is no maximum limit on savings in the account and this is relevant for you. Over a decade, there will be €30,000 in each of these accounts before interest (assuming that ever returns). Some banks have limits on their junior accounts that would make them impractical for your purposes.
Bank of Ireland’s childsave account, for instance, has a €10,000 upper limit cited in its terms and conditions, so it will likely not suit your purposes. At EBS, a subsidiary of AIB, the ceiling is an even more modest €5,000.
And then there is the credit union – never a bad habit to start for a child – or An Post, where investments can be made in savings bonds, certificates or national solidarity bonds, rolling over as they mature into subsequent products.
The credit unions all have children's savings accounts, sometimes referred to by individual credit unions as minor accounts, or junior accounts.
These are the sole property of the named child, although, if they are under the age of seven, someone will have to be nominated to open and operate it until they reach that age.
Personally, I would advise that you keep a record of specific payments made on specific dates to each of the children – together with any transaction slips – in case there is any confusion with the Revenue at a later date over compliance with the tax free small gift exemption limit of €3,000 a year. There’s nothing like a paper record for peace of mind.
Notable case
There was a notable case last year in which the Financial Services Ombudsman instructed a bank to repay more than €66,000 to a child whose father had raided their account.
The “junior bank account” was opened on the young girl’s behalf when she was just three months old. The child’s father had been authorised to manage the account on her behalf until she reached the age of seven.
The problem arose because, after the child turned seven and should have assumed signing rights on all withdrawals from the account, her father continued to withdraw funds from the account – with the consent of the bank – until almost all the money was dissipated.
The ombudsman ordered the bank to pay back the €66,000, plus interest.
As the example shows, it is possible to open an account from infancy – never mind the ages at which your children now are – but also that, once the child turns a certain age they will have sole rights to manage the account unless expressly stated otherwise.
And as long as the account is set up in their name (albeit alongside yours to fulfil the requirements of the bank), their should be no problem with persuading Revenue that the annual gift is for them as it accumulates over time – as long as you do not start withdrawing sums from it yourself.
The trick, of course, is how you persuade the children not to do so. After all, I presume the idea is that it is available for the sort of big ticket purchases they might require in adulthood.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.
