Video series: ‘Sofa talks’ – Experts answer questions about gifts
This series sees experts at ABN AMRO answer questions from clients. On the sofa today: Tjarko Denekamp (Wealth Planning Expert, ABN AMRO) and Bobby Le Febre (adviser from the Preferred Banking team). In this episode, they zoom in on the topic of gifts.
Question: “Can I still help my child to buy a house?”
Answer:
It’s a hot topic right now. We know that many first-time buyers are struggling on the market. To stand a chance, they need some serious cash – but where do they get that money? ‘Gifting’ is the obvious answer for many. It used to be possible for parents to gift their children €100,000 tax-free, but that scheme has been scrapped. You can still take advantage of a larger tax-exempt threshold for gifts, however. Many parents are now looking for ways to help their children buy a home, and lending could be an option. This is what’s known as a ‘family mortgage’, with parents lending money to their children – or sometimes vice versa. As this is a mortgage by all intents and purposes, the person taking out the loan will need to pay interest on it. The advantage of a family mortgage is that the lender can ‘gift back’ part of the interest. Equally, a family mortgage is a way for the lender to earn more interest on their capital than they would in a savings account. It can be a very good deal for both parties.
Question: “I want to give more money to one child than the other. How should I approach this?”
Answer:
You’re free to do what you want. You can give money to whomever you choose, and you can treat your children differently. Unequal treatment isn’t the same as unfair treatment. One child’s circumstances can differ from the other. Whatever you choose to do, make sure it doesn’t end in conflict. There may also be legal limitations: regardless of how you divide your assets, your children are entitled to claim a minimum amount of your estate under the law, known as the ‘legitieme portie’.
Question: “I want to give a gift to a friend. How should I approach this?”
Answer:
You’re well within your rights to do that. And again, there are tax-exempt thresholds. As your gift will be to someone other than your child, the tax exemption will be slightly lower. Obviously, this also depends on the amount you want to gift. What is your goal? There are various ways to give gifts: as a lump-sum amount or smaller amounts in instalments. If you’re planning to gift larger amounts, have a look at the gift tax rates. The larger the amount, the more likely you are to go above the threshold and land in the 30% band. That’s a high percentage.
Question: “Can’t I just buy things like a car and give them away?”
Answer:
Yes, you can, but the tax authorities will look at the value of the car. For tax purposes, it doesn’t matter whether you give that amount in cash or gift a car for the same value: a ‘gift’ is the action of transferring something valuable to another person, and that includes objects like cars.
If you have any questions about your finances, or you’d like to talk to an adviser, go to COACH and use one of our exclusive contact options for Preferred Banking clients.
If you have any questions about gifts, please also consult your tax adviser, financial adviser or notary.
