Wealth transfer to your child

There is no maximum to what you may gift your child. You probably mean: Which amount does my child not have to pay gift tax on? The annual exemption for children in 2023 is €6,633. For grandchildren, this is €2,658. You may gift a higher amount, but your child will then have to pay gift tax. Or can your child claim a one-time increased gift tax exemption?

The idea of ​​helping grandchildren with higher education costs or buying their first home is something that appeals to many grandparents. One way to do this is to leave a sum of money to your grandchildren in your will. This is usually done through a bequest of a sum of money. You then allocate a predetermined amount to your grandchildren in the division of your estate. This creates a direct bond between you as a grandparent and your grandchildren. A beautiful thought. Are you considering doing this too? 

Yes, this is possible, for example, with a gift under administration. You then gift an amount to your child that will be deposited into his or her account. The basic principle is indeed that your child will have this freely available on their 18th birthday. With a gift under administration you can ‘extend’ that age to, for example, 23 or 25 years. 

No, that is not the case. Even if a gift is made under administration, the money belongs to your children. This is reflected in the Annual Financial Statement that they receive from the bank. Children must also declare their assets in their income tax return from the age of 18. So they will find out that they have a claim to assets. Sometimes this is a reason for parents to wait with gifting. For example, until the children have completed their studies. 

No, that’s not possible. Gifts where you retain the assets are ignored for inheritance tax purposes. In other words, you do not realise any savings on inheritance tax for your child. Perhaps the closest thing to this idea is the gift on paper. You then keep the money in your own wallet and incur a debt to your child. However, you must pay your child at least 6% interest annually. And that can add up considerably over a period of years. 

It is possible to agree that you can reverse a gift. This can be done by including a revocation clause to the gift. It is good to take the practical side into account. Can your child do something with the gift if there is a possibility that it will have to be returned? This aspect is less relevant in the case of young children in combination with a gift under administration. A new development is that the question may arise whether it is permitted to revoke the gift in a particular situation.