Gifting money to loved ones: tips from Elfin and Preferred Banking
How exactly can you gift money to your loved ones? And what is gift tax? Does it matter whether you gift to your child or grandchild? In this video, Lieke Danenberg from Elfin – the biggest financial platform for women in the Netherlands and Belgium – speaks to Joëlle Veerman, Preferred Banking adviser.
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You can put money into a savings or investment account in your own name or in your child’s or children’s names. What’s the difference?
Joëlle: “You can put money in a savings account in your own name or invest money for your child. However, be aware that if you gift the money after your child’s 18th birthday, that money would be subject to gift tax and other rules. If you’re saving in your child’s name, they’ll be able to access that capital when they turn eighteen, as they’d then be legally an adult. They can also do whatever they want with the money.”
Lieke: “I remember receiving a huge amount of money from my parents. They hadn’t prepared me at all! Three months later, it was all gone. I think my excitement got the better of me.”
Joëlle: “Yes, that does happen. That’s why I think it’s a good idea to discuss that money with your child beforehand. Talk about what it’s meant to be spent on, such as their education or driving lessons. They can still do what they want, but I think it’s useful to have that talk. That money will belong to your<p> child. Once it does, you don’t have much say as a parent.”
Could I decide that my child shouldn’t be able to access the money when they turn 18?
Joëlle: “I understand how that could be a concern. No matter how much you trust your children now, you can never know how they’ll turn out. It’s important to be aware of that.
As a solution, ABN AMRO offers gifting under administration. This extends the age limit from 18 up to at most 30. As this isn’t the norm, you have to record it in a deed that prevents your child from accessing the money when they turn 18. You’re also saving in your child’s name, so the money isn’t subject to gift tax. The capital you build up can help your child in the future, be that with driving lessons, further education or buying a home.”
How does gift tax work?
Joëlle: “Each year, you can gift an amount of money to your child, grandchild or a nephew or niece. There are different tax rates and thresholds, so be sure to check the tax-exempt thresholds for gifts to children or grandchildren. You can always gift more, of course, but you’ll have to pay tax. The tax rates and thresholds differ depending on your relationship with the recipient. For instance, a gift to your child is taxed less heavily than a gift to your niece or nephew.”
How often do gift tax rates change?
Want to know how you can best gift money to your children or other people in your life?
