I am regularly asked questions about setting up a trust for a child or children.
A bare trust, also known as a simple trust, is one of the easiest ways to provide for children in a tax efficient way.
Firstly, the small gift exemption.
For example, a parent or grandparent, can each put €3,000 per annum into a bare trust for a child. This gift of €3,000 will be covered by the small gift exemption and will allow, over the course of 18 years, the giving of €216,000 (€3,000 x 4 x 18) tax free to the child.
Secondly, an asset that will appreciate over time.
Let’s say you put a house worth €300,000 into a bare trust for a child. There will be no capital acquisitions/gift tax for the child as her tax free threshold is €335,000.
The child is aged 10. Let’s say the value of the house increases over the following 8 years, which is a likelihood and when the child is 18 the house is worth €450,000.
The child is then taking this €450,000 house tax free.
To learn more about bare trusts check out this blog post of mine.