How To Transfer Wealth To Your Children & Protect Their Inheritance & Gift Tax Thresholds

Transferring your wealth to your children can be a frustrating process for business owners who find themselves in a position where they are financially secure and want to minimise CAT (Gift & Inheritance Tax) for their children.

The annual headline Lifetime Inheritance and Gift Tax (CAT) thresholds are currently set at €335,000 to each child. Any Gift or Inheritance over €335,000 is liable for CAT (Capital Acquisitions Tax) at 33%.

However, many business owners forget to avail of the ‘Small Gift Tax Exemption’.

The ‘Small Gift tax Exemption’ allows anybody to gift €3,000 each year to another person without any tax consequences for either party.

Let’s take the following example:

  • John and Mary have 2 children. They have surplus cash available to transfer to their children. They have property and other assets valued at €2,000,000 so they know that on their death their children’s CAT thresholds of €335,000 will be fully utilised.
  • John and Mary decide to gift €3,000 each to each of their 2 children every year using the Small Gift Tax Exemption.
  • That means John and Mary combined are gifting €6,000 to each child every year.
  • Over 20 years that works out as:
  • €6,000 to child 1 x 20 years = €120,000
  • €6,000 to child 1 x 20 years = €120,000
  • Total then is €240,000 wealth transfer to their children over 20 years saving what would have been 33% CAT on €240,000 = €79,200 Tax saved

This is just one simple measure we advise our clients to consider.

If you require more information, you can contact me on 01 5267770 or email